Asia-Pacific cross-border real estate investment surges 117% in Q1
Cross-border investment in Asia-Pacific commercial real estate more than doubled in the first quarter of 2025, surging 116.7% year-on-year to $9.5 billion, according to Knight Frank’s Asia-Pacific Capital Markets Insights Q1 2025 report. The rebound comes despite a slowdown in total deal activity from the previous quarter and ongoing global macroeconomic uncertainty.
Asia-Pacific’s total commercial real estate transaction volume reached $33.4 billion in the first quarter, a marginal 0.8% decline compared with the same period last year, but down 17.1% from the fourth quarter of 2024. That earlier quarter had seen an investment spike triggered by central bank interest rate cuts, which encouraged previously cautious investors to re-enter the market.
Although volumes fell short of that high benchmark, investor momentum continued, highlighted by the region’s largest transaction: a $2.6 billion acquisition of Tokyo Garden Terrace Kioicho by U.S.-based investment firm Blackstone from Japanese conglomerate Seibu Holdings. The landmark deal is the largest real estate purchase ever made by a foreign fund in Japan and Blackstone’s biggest investment in the country.
Cross-border investors accounted for 28.4% of total transactions, the highest share since the third quarter of 2023. Activity was mainly concentrated in Japan, South Korea, and Australia, where buyers targeted office, industrial, and retail assets amid stabilising valuations and improved financing conditions.
“Asia-Pacific’s real estate market held up well in 2025, with cross-border investment activity reflecting sustained interest, particularly in Japan, Australia, and South Korea,” said Craig Shute, CEO of Asia-Pacific at Knight Frank. “Stabilising asset prices and the clear signal that interest rates have peaked are encouraging investors to support renewed capital deployment. As investors gravitate toward office, industrial, and retail assets that offer resilient income and long-term growth potential, improved financing conditions and clearer valuation floors are helping to restore confidence across key markets.”
In Japan, the office sector drew the bulk of inbound capital, supported by a depreciated yen, low borrowing costs, and high occupancy levels underpinned by the country’s work-in-office culture. Constraints on new prime supply—driven by rising construction costs and labour shortages—have further strengthened pricing for existing assets.
South Korea’s industrial sector saw increased foreign investment, with Knight Frank attributing this to more acceptable interest rates, resilient sector performance, and tightening supply of prime logistics facilities.
In Australia, retail assets rebounded strongly, with investment volume nearly tripling year-on-year to $592 million. Knight Frank cited improved economic sentiment, easing inflation concerns, and rising retail sales as drivers of renewed activity and leasing momentum.
Early signs in the second quarter of 2025 suggest continued growth. Knight Frank noted that $5.6 billion in transactions were already recorded in the opening weeks of the period. Rate cuts and a clearer floor on asset values are improving confidence in debt-financed acquisitions.
ANALYSIS: The rebound in Asia-Pacific real estate investment will likely attract interest from UK and European investors. As asset prices stabilise and interest rates peak in key markets such as Japan, South Korea, and Australia, global capital is beginning to return.
This shift presents a window of opportunity for European institutions and funds looking to diversify geographically or secure long-term, income-generating assets. In particular, Japanese office and logistics properties could appeal to those seeking stable returns and lower-risk exposure in uncertain global conditions. Blackstone’s rapid $2.6 billion acquisition highlights the benefits of moving early as market conditions evolve.
