In 2024, Asia’s commercial real estate (CRE) market posted a clear recovery in transaction activity, led by the office (+5%p) and logistics (+66%p) sectors. Total deal volume reached approximately $235 billion, reflecting renewed investor engagement across core segments. Notably, even when excluding Blackstone’s acquisition of data center operator AirTrunk, annual transaction volume still recorded a 16% year-over-year increase—indicating sustained recovery momentum across the region.

Japan Leads the Way in Asia's Commercial Real Estate Recovery

In 2024, Japan is emerging as the key driver behind the recovery of Asia's commercial real estate (CRE) market. The country recorded $49.4 billion in CRE transaction volume—its highest level in the past decade. This surge has mainly been supported by stable office demand and a persistently low interest rate environment, which continue to attract significant foreign capital.

A notable yield spread has further enhanced Japan's investment appeal. As of 2024, the 10-year government bond yield is just 1.1%, while office asset cap rates are around 4.1%, resulting in a healthy spread of approximately 300 basis points (bps). Reflecting this favorable dynamic, the share of foreign capital in Japan's CRE investment reached 45% in 2024—its highest level since 2015.

In contrast, China was the only primary Asian market to see a decline in CRE transaction volume, which dropped to $41.0 billion in the same period of 2024, down 16.3% year-over-year. Notably, distressed asset transactions accounted for 17.3% of the total, indicating that restructuring-related deals dominated the market. By sector, logistics led with 43% of transactions, followed by retail (23%) and hotels and offices (each at 13%).

From a sector perspective, 2024 also saw significant deal activity in the data center segment. This trend underscores the aggressive investment strategies of global asset managers targeting infrastructure-backed assets, particularly in energy and telecommunications.

Asia Office Market: Recovery in Demand Amid Supply-Demand Polarization

Despite the global office sector facing sharp headwinds, Asia’s office market has shown relatively resilient performance, with demand rebounding more quickly in the post-pandemic period. That said, current demand levels still fall short of historical averages.

Certain cities, particularly in Australia and parts of China, experience elevated vacancy rates. While supply is expected to slow in the coming years, this will likely create upward pressure on rents over the medium to long term.

Excluding China, net absorption across the APAC office market remains below historical norms. According to PMA, the regional net absorption rate 2024 stood at just 0.7%, well below the long-term average of 2.4% recorded between 1991 and 2008 and the more recent 10-year average of 1.1% between 2009 and 2019. These figures indicate that while signs of demand recovery are emerging, a full-fledged rebound remains elusive.

As of Q4 2024, vacancy rates in major Asian cities vary significantly by region. Markets such as Seoul, Osaka, and Nagoya maintain relatively healthy supply-demand dynamics, with vacancy rates under 10%. In contrast, key cities in Australia (Brisbane, Perth, Sydney, Melbourne) and China (Beijing, Shanghai, Guangzhou) continue to face vacancy rates exceeding 20%, reflecting persistent oversupply challenges.

Real rental growth is expected to regain momentum over the medium to long term. Over the coming years, real rental growth is anticipated to accelerate, with most core markets poised for solid gains between 2028 and 2029. Hong Kong, Shanghai, Singapore, and Melbourne are expected to lead the trend, with annual increases projected at 7–8%.

Asia Logistics: Shifting from Overheating to Balance

Since 2022, the logistics sector has experienced sharp rental growth and asset price corrections, driven by a surge in e-commerce demand and a temporary supply concentration.

On the supply side, as of 2024, most major Asia-Pacific cities—excluding Australia—are seeing a decline in new logistics facility deliveries. While Australia, particularly Melbourne and Sydney, continues to exhibit robust supply growth, markets such as Tokyo, Seoul, Osaka, and Singapore are entering a phase of supply-demand rebalancing amid a slowdown in new development. In Seoul, following a supply surge in 2023, new additions showed signs of moderation in 2024.

On the rental side, the pandemic brought about a spike in e-commerce penetration and significant bottlenecks in logistics infrastructure, leading to sharp rent increases in some markets. Sydney, for example, experienced a dramatic drop in vacancy to just 0.3%, with rents rising more than 30% year-over-year in 2023—highlighting the price pressure driven by extreme supply constraints. In contrast, cities like Seoul, Tokyo, and Singapore recorded moderate rental growth, reflecting a more tempered market trajectory.

A similar pattern is observed in changes to the CPPI (Commercial Property Price Index). Most markets saw price corrections around 2022, with Hong Kong experiencing the steepest decline—dropping over 20% since 2023. Meanwhile, Korea and Australia have shown relatively stable trends, with a gradual adjustment phase expected to continue through 2024.

Asia Retail: Declining Vacancies Reflect Consumption Recovery

In 2024, the Asia retail real estate market showed signs of a gradual recovery, marked by a broad-based decline in vacancy rates. Following a pandemic-induced spike that peaked at 9.4% in 2021, regional retail vacancies have steadily declined, reaching 5.6% as of Q2 2024—a sign of market stabilization.

However, performance continues to vary significantly by region. Cities like Seoul (7.8%) and Sydney (8.7%) still report vacancy rates above pre-pandemic levels, mainly due to delayed consumer recovery and the lingering impact of prior supply accumulation. In contrast, Tokyo, Singapore, Nagoya, and Osaka maintain relatively low vacancy levels. Singapore has a stable vacancy rate in the low 1% range.

Based on long-term vacancy trends from 2008 to 2024, most major cities are either approaching historical averages or maintaining a stable trajectory, with some markets benefiting from structural demand recovery and recording below-average vacancy levels.

Retail sales growth (YoY, 3-month moving average)—a key consumer sentiment indicator—also reflects signs of recovery. Singapore and China experienced sharp rebounds in 2021–2022, followed by stable performance. Japan continues to show a modest but steady upward trend.

On the other hand, Korea and Australia saw relatively sluggish retail recovery through 2023. However, a gradual improvement is expected post-2025, supported by potential interest rate cuts and a rebound in in-person consumption. Hong Kong, which faced a steep drop in retail activity due to the pandemic and regulatory restrictions, has seen a sharp recovery since 2021 and continues to trend positively in recent quarters.

Asia Multifamily: Growth Backed by Demand and Demographics

In 2024, the Asia multifamily sector continued demonstrating steady transaction activity, led by Japan and Australia, as institutional demand for residential assets remained resilient. Total transaction volume reached USD 6.6 billion, with Japan accounting for the largest share at USD 4.1 billion, followed by Australia at USD 3.2 billion. Although markets like Singapore and South Korea remain relatively small, growing investor interest reflects expectations for future demand expansion.

The price-to-income ratio (PIR) in major cities remains elevated—18x in Seoul and 14x in Singapore and Tokyo—indicating significant affordability challenges for homebuyers. This dynamic suggests strong potential for rental demand and further development of the multifamily housing market. While markets with high PIRs may face price correction risks, cities such as Osaka, Sydney, and Melbourne—with PIRs below 9x—have room for further asset price appreciation.

Demographic shifts, particularly aging populations, are also emerging as key structural drivers for multifamily market growth. Over the next decade, the population aged 65 and older will grow by more than 4% in Singapore, South Korea, and China—fueling demand for senior housing solutions. In contrast, where more than 30% of the population is already over 65, Japan is considered a mature market with a stable demand base.

Conclusion: Strategic Differentiation in a Recovering CRE Market

The global commercial real estate (CRE) market is expected to recover gradually beyond 2025. However, the pace and strength of this recovery will vary significantly across regions and sectors, driven by differences in macro fundamentals and demand structures.

In the U.S., concerns about political risk and heightened market volatility have emerged. While policies under a potential Trump administration could raise stagflation risks, focusing on domestic stimulus through tariff measures may support underlying fundamentals. As such, recovery is expected to center around demand-resilient residential, logistics, and retail sectors.

Europe is projected to enter an economic recovery cycle despite ongoing geopolitical uncertainties. Government-led stimulus and tax-cut policies will likely accelerate the normalization of CRE markets. In contrast, Asia has demonstrated stronger resilience, experiencing more minor corrections during the downturn. However, this defensive strength may also limit the extent of yield upside. Accordingly, strategic focus is shifting toward high-growth sectors such as multifamily housing and data centers.

Income Strategies Rise as Structural Demand Gains Momentum

The CRE investment paradigm is undergoing a notable shift from capital gain–driven strategies to those centered on income generation. Prior to the 2023 rate hikes, a low interest rate environment and broad market appreciation enabled strong capital gains. Even amid asset price corrections—especially in Asia—many markets continued to offer stable income-based cash flows.

As investors look ahead, persistent high interest rates, growing macro uncertainty, weaker investor sentiment, and tighter liquidity are expected to erode capital appreciation potential. As a result, income gain is set to play a more significant role in total returns, requiring investors to reframe their strategies with a renewed focus on yield.

Traditional investment approaches may no longer suffice to meet target returns in this evolving environment. As such, there is increasing interest in alternative income streams and scalable growth models. Sectors like multifamily, data centers and senior and student housing are gaining traction as viable, yield-enhancing opportunities.

This structural shift also takes shape across Asia, where long-term demographic changes and industrial transformation support demand in resilient growth sectors. Multifamily, senior housing, student housing, and data centers are receiving heightened investor attention, underpinned by clear demand visibility and sustainability.

However, many emerging asset classes have not established fully validated, stable income models. Additionally, fast-evolving market dynamics suggest that opportunistic investment and early exit strategies may be more effective in the near term. Rather than short-term timing, a focus on long-term structural demand is increasingly critical. Strategic selection of sectors with sustainable performance and long-term growth potential will be more crucial than ever.

By Soyeong Park, Contents Writer

Data Analysis & Review by Strategic Research Division, IGIS Asset Management

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