Investors rebalance portfolios toward logistics, data centers

Amidst weak market recovery, institutional investors are shifting to long-term focus.

Institutional investors in Asia Pacific are making a long-term pivot toward logistics assets and data centers, as traditional real estate segments like retail and office continue to face pressure from high interest rates and uncertain market conditions.

This structural shift has been underway for more than a decade but is now becoming more pronounced, according to the Emerging Trends in Real Estate Global Outlook 2025, jointly published by PwC and the Urban Land Institute (ULI).

“Logistics is now a very important part of institutional real estate investors' real estate portfolios,” said Mark Cooper, Senior Director of Thought Leadership at ULI Asia Pacific.

The reallocation comes at a time when overall capital market activity remains muted, despite a 13% quarter-on-quarter increase in real estate investment volumes in Q4. Much of that uptick was due to a single large deal, while the broader market continues to suffer from low yields and elevated borrowing costs.

The demand for logistics stems from persistent structural changes in consumer behavior, particularly the rise of e-commerce, which has boosted warehouse demand across the region.

“Data centers are slightly different. There is some disagreement about whether it’s real estate or infrastructure, but regardless of which bucket it’s held in, this sector is seen as a fundamental infrastructure support for modern digital business,” Cooper noted. “Therefore, I think the interest is going to be long term.”

Stuart Porter, APAC Real Estate Leader at PwC, agreed. “Let’s say there’s 200 or so data centers in Japan, and there’s 5,000 in the US, so there’s much long-term opportunity, and you see that in the rest of Asia as well.”

However, he cautioned that challenges remain. “If you talk to the engineers and the real specialists, you’ve got group capacity issues in places like Japan as well. So the growth may not be exponential to the extent of catching up to places like the US, but it’s certainly there and embedded.”

Despite near-term volatility and macroeconomic headwinds, investors appear to be increasingly guided by long-term structural themes rather than short-term cycles. “Yes, Deep Seek and others have a little bit of a shock to the thinking, but I don’t think that changes the trajectory,” Porter added. “It probably just makes the analysis a little bit more refined and thoughtful, as opposed to just piling in.”