Asia-Pacific commercial real estate investment is holding steady into 2026, even as escalating geopolitical tensions in the Middle East and shifting capital dynamics prompt investors to reassess risk and reallocate flows across the region, according to new analysis from CBRE.
The data captures conditions in the opening months of 2026, before the April escalation of the Middle East conflict intensified volatility in energy prices, inflation concerns and global investor sentiment. Following a strong rebound in 2025, first-quarter transaction activity remained resilient, fueled by robust domestic liquidity in core markets and selective international capital targeting assets that had repriced amid earlier uncertainty.
Yet the latest flare-up in the Middle East — driving higher energy costs and renewed pressure on borrowing rates — has introduced a layer of caution, with investors becoming more discerning about deployment while liquidity overall stays available.
The divergence is most pronounced in South Korea, where domestic institutional capital has reasserted control. Large allocations into blind funds have strengthened local asset managers, allowing them to compete aggressively — and often successfully — against foreign buyers for prime office and logistics assets. Transaction volumes are projected to ease modestly from 2025’s record levels but should still exceed long-term averages, with heightened competition for top-tier properties. Office deals continue to dominate activity, though interest is concentrating in Grade A assets in central locations. Logistics remains a bright spot, attracting both domestic and cross-border buyers amid tight supply of quality product. Emerging segments such as hotels and data centers are also drawing increased attention.
In Australia, the outlook is more nuanced. Early-year rate hikes, linked in part to global energy-market pressures, have begun to temper forward-looking sentiment and push borrowing costs higher. Deals struck late in 2025 are still closing, but many investors have shifted to a selective “wait-and-see” posture as pricing adjusts. Retail has stood out as a relative performer, supported by dependable income streams and attractive yields. Office markets, especially in Sydney, continue to see competitive bidding thanks to limited supply of prime space. Rising construction costs — up sharply in recent periods amid broader shocks — are constraining new development pipelines, which in turn helps underpin values for existing assets while limiting fresh product for sale. International capital is expected to play a growing role through the rest of 2026, viewing the current environment as an entry point for high-quality assets at more compelling valuations.
Hong Kong is exhibiting early signals of stabilization. Investment sentiment has improved modestly amid easing borrowing benchmarks, with activity centered on the living sector. Conversions of assets into student accommodation have accelerated over the past year, though the pool of readily convertible properties is shrinking, pushing investors toward co-living and build-to-rent strategies. Office transactions are increasingly driven by owner-occupiers taking advantage of what many see as cycle-low pricing. Global investors with on-the-ground presence continue to signal appetite for deployment, though broader institutional allocations remain constrained by geopolitical considerations. CBRE forecasts Hong Kong investment volumes to rise 5% to 10% for the full year, with current momentum leaning toward the higher end of that range.
Region-wide, a consistent pattern is taking shape: capital remains available, but its allocation is growing more targeted. Domestic strength, geopolitical risk premiums and the realities of a higher-for-longer rate environment are all shaping decisions. Office assets have regained favor among investors for the first time since 2020, according to CBRE’s latest Asia-Pacific Investor Intentions Survey, while logistics, data centers and living sectors offer differentiated opportunities.
For sophisticated investors, the Asia-Pacific landscape still presents compelling entry points — provided they navigate an increasingly complex interplay of local liquidity, sector-specific fundamentals and macro headwinds with precision. CBRE expects overall regional commercial real estate investment volumes to increase 5% to 10% in 2026, extending the recovery while rewarding selective, well-researched strategies.
“While investment sentiment was strong at the beginning of 2026, the impact of the Middle East conflict on commercial real estate has seen some investors take a more cautious stance given the impact on energy prices, inflation and interest rate movements,” said Greg Hyland, Head of Capital Markets, Asia Pacific at CBRE.
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