APAC commercial real estate investment breaches five-year average

Investments hit over US$53 billion in Q2.

Asia-Pacific commercial real estate investment reached US$53.5 billion in the second quarter of 2026, up 31.1% year on year and 16.1% above the five-year Q2 average, according to Knight Frank's latest Asia-Pacific Capital Markets Insights.

Quarterly activity fell 22.5% from the record first quarter, but Knight Frank said the decline represented a normalisation following an exceptional start to the year rather than a reversal of the regional recovery.

Dan Dixon, head of capital markets, Asia-Pacific, at Knight Frank, said institutional investors were re-engaging with greater conviction, particularly where assets offered resilient income and clear execution opportunities. He described the market as increasingly driven by discipline and asset-level conviction rather than broad-based momentum.

Hotels were the strongest-growing major sector, with investment reaching US$5.4 billion, up 55.2% year on year. Knight Frank attributed the increase to the continued tourism recovery, improving hotel operating performance and limited availability of quality assets. Refurbishment, repositioning and rebranding opportunities were also supporting investor interest.

Recent transactions included CapitaLand Investment's US$243.1 million acquisition of Voco Seoul Myeongdong and Wentworth Capital's US$269.2 million purchase of two Sydney hotels. Knight Frank also cited its S$273 million sale of The Orchid Hotel in Singapore in June and its advisory role on the sale of Hong Kong's Silka Seaview Hotel in July.

Cross-border investment totalled US$12.5 billion, representing 23.4% of regional investment. Although down 42.2% from Q1's unusually high US$21.7 billion, the figure was 156.8% above Q2 2025, reflecting stronger international investor participation.

Japan remained the leading destination for cross-border capital, attracting US$5 billion, more than double its year-earlier total. Singapore followed with US$3 billion, more than three times the Q2 2025 figure. International investors accounted for 58.1% of Singapore's total investment volume, led by IOI Properties Group's US$1.9 billion purchase of Asia Square Tower 2.

Australia attracted US$1.9 billion of cross-border capital, up 56.9% year on year. Knight Frank said this reflected selective re-engagement following valuation resets rather than a broad return of offshore capital. Cross-border hotel investment in Australia rose almost fivefold to US$674 million, including Forest Endeavour's US$250 million acquisition of Novotel Surfers Paradise and the adjoining Paradise Centre.

Knight Frank said liquidity, transparency and established investment frameworks were making gateway markets increasingly attractive as financing conditions remained demanding.

Looking ahead, the firm expects the recovery to remain selective, with prime offices, selected retail, logistics and tourism-linked hotels likely to remain in focus. Christine Li, head of research, Asia-Pacific, at Knight Frank, said liquidity was concentrating around quality assets, clearer pricing and large-scale execution opportunities.

Knight Frank expects the remainder of 2026 to favour investors with strong conviction and the ability to execute complex transactions, with pricing alignment, income visibility and value-add potential key to the pace of deployment.