Insight

The real estate market is currently shaped by several key factors, including fluctuations in interest rates, economic slowdown, and evolving financing conditions. As a result, different sectors are experiencing distinct market dynamics. In response to these changes, IGIS' in-house research team has proactively analyzed the significant trends in Korea's commercial real estate market and developed tailored outlooks for each sector in 2025, ensuring our readiness for future market conditions. Sector forecasts INDUSTRIAL: South Korea’s logistics market showed high e-commerce penetration and size through 2023. In Q1 2024, e-commerce penetration rose slightly to 33%, driven by inflation rather than transaction growth. In H1 2024, small to medium properties saw slight price increases despite slower transaction volumes. The southeast experienced rapid price drops due to 2023’s massive supply increase. Vacancy rates reached 14% for dry and 41% for cold storage, with a notable supply-demand imbalance in the southeast. We expect a continued transaction slowdown as distressed assets enter the market, leading to auction-driven price corrections. While the new 2024 supply focuses on south/west regions, southeast vacancies should stabilize by 2025 due to strong demand and limited future supply. Cross-border e-commerce growth, both inbound and outbound, promises new demand. The west region, preferred by cross-border tenants for its global ports, is likely to absorb oversupply quickly. OFFICE: The South Korean office market has demonstrated relatively resilient performance compared to global markets, supported by supply constraints and a low adoption rate of remote work. During the first half of 2024, major completed deals were driven mainly by demand from global asset managers and corporate headquarters usage demand. Despite a modest increase in new supplies, most of the supply is focused on non-core business districts (i.e., Magok). As a result, leasing demand has continued to grow. Rents increased by 6-8% year-over-year, while vacancy rates remained low at 2.4%, well below the natural vacancy rate of 5%. However, a notable trend has emerged: the strong leasing momentum in the market began to slow, as evidenced by a decrease in rent growth and a slower increase in occupied space. We expect the office investment market to recover by late 2024, though price adjustments may extend cautious investor sentiment. Limited prime office supply will maintain demand over the next five years, but rapid price appreciation is unlikely. The trend toward prime/grade-A offices will continue, and distressed assets may increase as Korean savings banks realize losses from H2 2024. RESIDENTIAL: Korea’s rental housing market has traditionally been dominated by individual investors through direct ownership and the Jeonse system (unique lease arrangements with large refundable deposits), limiting institutional participation. However, recent market shifts – including slower housing price growth, reduced transactions, and Jeonse deposit risks – create new institutional opportunities. Three key factors support the sector’s potential: 1. Despite an aging population, household demand is projected to grow until 2040, with single and two-person households aged 40+ representing 70% of total households. 2. Declining housing development since 2020 has led to an aging inventory and limited high-quality options. 3. The current individual rental system’s inefficiencies and risks are becoming apparent. These factors and evolving tenant preferences make corporate rental housing increasingly attractive to institutional investors. RETAIL: The retail sector has seen a resurgence in commercial districts due to increased offline activities. However, it faces challenges from subdued consumer sentiment and a shift towards service-oriented spending. Transaction volumes remain below pre-pandemic levels, with limited diversity in transaction types. We propose a strategic change in the retail sector’s approach, focusing on traffic-generating attractions and value-added components. Enhancing overall appeal and viability could involve integrating retail spaces with other sectors, such as office, residential, or mixed-use developments. * Our investment strategies are implemented by experienced teams working in private and public markets. Our platform allows our investment professionals to gain local-level property and market insights from more than 450 in-house specialists across the nation and overseas offices and a top-down economic perspective from IGIS’ in-house research. We believe a commitment to research and its practical application to decision-making is critical to the success of every investment portfolio the firm manages. By Soyeong Park, Contents Writer Data Analysis & Review by Strategic Research Division, IGIS Asset Management ──────────── -This content has been prepared for informational purposes only and is not intended to serve as a basis for investment decision-making by users. It is not created for the purpose of promoting, soliciting, or recommending financial investment products, providing investment advice, or making stock recommendations. The company makes no express or implied representations or warranties regarding the accuracy or completeness of any materials or information provided in this content. Furthermore, the company assumes no responsibility or liability for any damages or losses incurred because of investment decisions made based on this content. Potential investors shall not raise any objections in this regard. -The above information is based on data as of February 2025 and has been prepared in compliance with applicable laws and internal control standards. The materials and information in this content are subject to change due to changes in market conditions, the stock market, interest rates, inflation, tax policies, and other social, economic, or policy-related factors. Additional risks may arise from asset price fluctuations, exchange rate volatility, credit rating downgrades, declines in real estate prices, investment performance results, or unforeseen natural disasters such as fires, floods, or pandemics. Consequently, financial (investment) products may result in partial or total loss of the principal investment, with such losses being borne by the investor. These products are not protected by the Korea Deposit Insurance Corporation under the Depositor Protection Act. Past performance does not guarantee future returns, and the results may differ from the performance at the time of content creation or in the future. Additional transaction and other costs may also apply. -This content has not been legally submitted or registered, nor has it been approved under any applicable law. It may contain subjective opinions that do not necessarily represent the official views or statements of the company. This content is not intended to solicit, offer, or recommend the subscription, purchase, or sale of securities. Investors have the right to receive sufficient explanations from financial product sellers in accordance with applicable laws. All investment decisions should be made carefully and solely on the information provided in the securities registration statement, (preliminary) investment prospectus, and terms and conditions. Investors should make prudent decisions based on their own judgment. [IGIS Asset Management Co., Ltd. Compliance Officer Review No. 900-25-Ad-046 (March 6, 2025 – March 5, 2026)]

Amid a growing array of alternative investment opportunities in global asset markets, commercial real estate (CRE) has recently exhibited relatively subdued performance in terms of both returns and recovery pace. Traditionally positioned as a hybrid investment class between equities and fixed income, CRE has experienced a notable compression in yields over the past few years, driven largely by aggressive monetary tightening and a sharp rise in interest rates. Historically, real estate has been viewed as an effective hedge against inflation, with its performance closely tied to capital market variables such as liquidity and interest rates. In environments marked by high inflation and low interest rates, abundant liquidity has typically supported asset price appreciation and led to cap rate compression. Alongside macroeconomic drivers, investment performance has also been shaped by micro-level factors, including the ability to secure high-quality assets or identify undervalued opportunities for acquisition or development. However, early signs now point to a potential structural shift in this conventional framework. In previous cycles, high capital costs meant that real estate valuations were largely driven by capital market forces. Yet, post-pandemic trends in cap rate movements by sector suggest a decoupling of sorts—where asset-level dynamics and sector-specific fundamentals are beginning to lead capital cycle shifts, resulting in a new pattern of yield repricing. This signals a broader transformation in how CRE performance is being calibrated across changing macro and microeconomic environments. Tech-Driven Shifts in Sectoral Growth Models The global real estate market has entered a phase of heightened uncertainty, marked by volatility across economic, political, and technological dimensions. Market fluctuations are intensifying, policy direction remains opaque, and disruptive innovations are accelerating the transformation of industrial structures. Major global investors increasingly recognize that asset valuations may be approaching a cyclical floor within this context. As a result, a selective and forward-looking approach is becoming increasingly critical, replacing the previously dominant stance of passive observation. Investor focus is particularly on sectors with structural growth potential, such as data centers, power and energy infrastructure, and utilities—assets perceived to be better positioned for transformation. As a result, future investment strategies will need to prioritize selectivity based on adaptability to structural change and long-term growth potential. Industrial-like assets underpinned by technology and infrastructure are gaining traction for their scalability, while consumer-facing assets are evaluated on operational flexibility and their ability to pivot through model innovation. By contrast, traditional assets reliant on stable rental income may prove structurally vulnerable in this environment, reinforcing the need for a more conservative approach. In times of heightened uncertainty, strategic allocation to sectors with strong fundamentals and greater adaptability will be key to maintaining performance resilience. U.S. Office: Recovering Demand, Limited Supply The U.S. office market shows early signs of bottoming as return-to-office (RTO) momentum accelerates and new supply growth slows. While average vacancy rates across significant cities remain elevated at approximately 23%, sustained office utilization by major corporates such as Walmart, Amazon, and Microsoft—via five-day or hybrid work models—is gradually restoring baseline demand. From a financing perspective, elevated delinquency rates in the office segment’s CMBS exposure and widening debt spreads continue to weigh on investor sentiment. As a result, pricing corrections remain ongoing. According to RCA (Real Capital Analytics), average office valuations as of Q4 2024 were down 24% from the Q2 2022 peak—heightening interest in the sector from a valuation standpoint. On the supply side, construction cost inflation has significantly curtailed new starts, with 2024 supply growth projected at just 0.5%—well below historical averages. This contraction alleviates oversupply concerns and sets the stage for a more balanced market dynamic when combined with increasing demand for office-to-residential or hotel conversions. These developments lay the groundwork for mid-to-long-term repricing opportunities and renewed investor interest. The convergence of stabilizing demand and constrained supply may catalyze reassessing asset value and rebuilding market confidence in the office sector. New York Prime Office: Renovation and Investment Reevaluation Accelerating The New York prime office market is showing early signs of recovery, driven by a decline in vacancy rates and renewed investor interest in Midtown assets. This growing optimism reflects an active reevaluation of strategies centered on high-quality office properties. Investor preference for Class A and above assets has become increasingly pronounced, widening the performance gap between prime offices and the broader market. According to Green Street, as of 2024, the vacancy rate for prime office space is 815 basis points (8.15) lower than the market average—more than double the historical spread of 350 bps recorded between 2012 and 2020. This trend highlights the apparent divergence in investor appetite favoring premium-grade assets. Revenue per available floor (RevPAF) data further supports this segmentation. While Class A properties show signs of rent stabilization and recovery, B and B+ assets continue to lag, indicating a market shift toward core, premium holdings. Geographically, New York’s prime office vacancy rate has begun to decline in 2024, outperforming both national and other gateway city averages. Midtown Manhattan is particularly poised for rent growth, while Central Business Districts in cities such as Chicago (+1.8%) and New York (+0.8%) also exhibit early recovery momentum. In response, investors are increasingly initiating renovation plans and re-entering the market, focusing on core prime assets. U.S. Logistics: A Shift Toward Industrial Supply Chain Integration The U.S. logistics sector is navigating near-term headwinds, including a slowdown in e-commerce growth and a surge in supply. These factors have led to rising vacancy rates and downward pressure on rents. However, over the medium to long term, increasing demand for manufacturing-related logistics is expected to support a more stable sector outlook. According to forecasts, rental growth across key U.S. markets may remain subdued or negative in cities like Phoenix and Philadelphia through 2025–2026. Nonetheless, a broader uptrend is anticipated from 2027 onward. According to Green Street, despite the recent moderation in e-commerce penetration, the overall market continues to expand, with an average CAGR of approximately 11%. Simultaneously, construction investment in manufacturing facilities has surged by 207% compared to 2019, signaling a robust uptick in demand for domestic industrial logistics. On the supply side, the post-2022 boom in logistics center development has raised concerns about oversupply. However, the start of the new project is beginning to moderate. In particular, the share of newly developed logistics assets serving manufacturing-related functions reached 19% in 2024, highlighting a structural pivot toward industrial supply chain infrastructure within the U.S. logistics market. U.S. Multifamily: Gateway Markets Lead Recovery, Sunbelt Under Adjustment The U.S. multifamily sector continues to see steady growth in rental demand, driven by an increase in the number of households and the rising burden of homeownership costs. Housing costs to household income rose from 15.7% in 2019 to 25.5% in 2024, as elevated home prices and rising interest rates have further deteriorated affordability for potential homebuyers. According to FRED data, U.S. households increased from approximately 128.6 million in 2020 to 132.2 million in 2024, contributing to a corresponding rise in rental housing demand. Regionally, gateway cities such as New York and Chicago are seeing declining vacancy rates and upward rent pressure in 2024, supported by a resurgence in return-to-office (RTO) activity and limited new supply. In contrast, key Sunbelt markets—including Austin, Houston, and Phoenix—face near-term oversupply, leading to elevated vacancy levels. Green Street data shows that between 2021 and 2024, vacancy rates in these cities rose significantly, with 2024 rents expected to decline by approximately -6.0% in Austin and -2.5% in Phoenix. Nevertheless, it is essential to note that Sunbelt markets continue to benefit from favorable living conditions and strong domestic migration trends. Despite short-term adjustments, these markets retain solid long-term fundamentals, warranting continued attention from a strategic investment perspective. U.S. Niche Sectors: Expanding on Structural Demand Niche real estate sectors in the U.S. are experiencing rapid growth, driven by demographic shifts and structural economic changes. Investor interest in specialized asset classes such as senior and student housing, healthcare facilities, self-storage, and data centers has notably increased. According to Preqin, the share of real estate transactions involving niche sectors has expanded from 2% in 2019 to 7% in 2024. When including broadly defined niche segments—such as data centers and multifamily assets as classified in some markets—the combined share has grown from 62% to 69% over the same period. In contrast, the office sector’s share declined from 35% to 15%, highlighting a clear divergence in investor preferences. This shift underscores the broader reallocation of capital from traditional office and retail to residential and logistics-oriented assets. The trend also aligns with rising structural demand for healthcare and lifestyle infrastructure, fueled by the aging population and the growing number of single-person households. Between 2025 and 2030, the population aged 65–84 is expected to grow at an average annual rate of 2.2%, while the 85+ demographic is projected to expand by 4.0% annually. During the same period, the number of single-person households is also forecast to increase steadily (Census Bureau, November 2023 projection). These shifts will likely drive growing demand for niche assets such as senior housing, healthcare facilities, and compact residential units. From an industrial perspective, the U.S. economy is also witnessing a shift in composition. The GDP share of knowledge-based sectors—including information technology, professional services, education, and healthcare—is expanding, while traditional sectors like manufacturing, finance, and construction are gradually declining. As a result, real estate, which is linked to knowledge industries, such as data centers and premium infrastructure assets, is emerging as an increasingly attractive investment theme. U.S. Data Centers: Emerging as High-Growth Infrastructure Assets Data centers are rapidly emerging as a high-growth infrastructure asset class characterized by strong return potential and rapid capital deployment. In recent years, investment activity has increasingly centered around opportunistic strategies, with a growing number of investors—including real estate, private equity, and infrastructure funds—actively targeting data centers and related infrastructure. Investment structures are also becoming more diversified through strategic alliances with cloud service providers (CSPs). According to BCG, power demand from data centers in the U.S. is expected to rise from 25GW in 2020 to 81GW by 2028, representing an annual growth rate of 13–18%. While supply is expanding, it continues to lag behind demand, which is expected to keep vacancy rates at structurally low levels. Data centers are capital-intensive assets, with average development costs estimated at approximately $1,500 per square foot—roughly twice the price of developing office space. Despite this, 80% of data center investment strategies in 2024 are focused on opportunistic plays, reflecting a clear preference for ground-up development. This is mainly due to the increasingly complex and demanding specifications around MEP (Mechanical, Electrical & Plumbing) systems and power capacity driven by ongoing technological advancements. From a capital markets perspective, global institutional investors actively enter the space through large-scale funds and strategic partnerships. Major players like BlackRock, GIP, MGX, NVIDIA, and Microsoft are expanding collaborative frameworks for data center deployment and energy infrastructure development. These initiatives underpin mega-deals ranging from $30 to $100 billion, often involving vertically integrated platforms combining energy infrastructure with semiconductor and hyperscale computing technologies. [2] 2025 CRE Outlook | Europe [3] 2025 CRE Outlook | Asia By Soyeong Park, Contents Writer Data Analysis & Review by Strategic Research Division, IGIS Asset Management ──────────── -This content has been prepared for informational purposes only and is not intended to serve as a basis for investment decision-making by users. It is not created for the purpose of promoting, soliciting, or recommending financial investment products, providing investment advice, or making stock recommendations. The company makes no express or implied representations or warranties regarding the accuracy or completeness of any materials or information provided in this content. Furthermore, the company assumes no responsibility or liability for any damages or losses incurred because of investment decisions made based on this content. Potential investors shall not raise any objections in this regard. -The above information is based on data as of March 2025 and has been prepared in compliance with applicable laws and internal control standards. The materials and information in this content are subject to change due to changes in market conditions, the stock market, interest rates, inflation, tax policies, and other social, economic, or policy-related factors. Additional risks may arise from asset price fluctuations, exchange rate volatility, credit rating downgrades, declines in real estate prices, investment performance results, or unforeseen natural disasters such as fires, floods, or pandemics. Consequently, financial (investment) products may result in partial or total loss of the principal investment, with such losses being borne by the investor. These products are not protected by the Korea Deposit Insurance Corporation under the Depositor Protection Act. Past performance does not guarantee future returns, and the results may differ from the performance at the time of content creation or in the future. Additional transaction and other costs may also apply. -This content has not been legally submitted or registered, nor has it been approved under any applicable law. It may contain subjective opinions that do not necessarily represent the official views or statements of the company. This content is not intended to solicit, offer, or recommend the subscription, purchase, or sale of securities. Investors have the right to receive sufficient explanations from financial product sellers in accordance with applicable laws. All investment decisions should be made carefully and solely on the information provided in the securities registration statement, (preliminary) investment prospectus, and terms and conditions. Investors should make prudent decisions based on their own judgment. [IGIS Asset Management Co., Ltd. Compliance Officer Review No. 900-25-Ad-051 (April 18, 2025 – April 17, 2026)]

The European commercial real estate (CRE) market has entered a valuation correction phase, driven by interest rate hikes and heightened economic uncertainty. Among major global regions, Europe continues to exhibit the slowest pace of recovery. Prolonged investor caution and deteriorating capital market conditions have further contributed to a continued slowdown in capital inflows. In 2023, total fundraising for European commercial real estate amounted to approximately USD 14 billion—marking a 54% decline year-over-year and underscoring the persistence of market correction dynamics. Signs of a Bottoming Out: Early Recovery Sentiment Emerging Fundraising activity in the European commercial real estate (CRE) market remains subdued in 2024, even further down from 2023 when the global CRE downturn became more pronounced. The further decline in fundraising activity suggests that a short-term recovery remains unlikely. However, average asset prices have declined from €3,333 per square meter in 2021 to €2,561 in 2024, approaching cyclical lows. Recently, tentative signs of a rebound—around 4%—have emerged. As a result, there is a growing perception that the price correction has largely run its course, fueling investor expectations of a gradual recovery beginning in 2025. According to a survey conducted by CBRE of 781 institutional investors across Europe, 70% view 2025 as the turning point for market recovery, while the remaining 30% anticipate a rebound from 2026 onward. These results suggest that the prolonged CRE downturn in Europe is increasingly seen as nearing its end, aligning with broader expectations for macroeconomic recovery across the region. Market sentiment is driven less by a marked improvement in fundamentals and more by a belief in the normalization of pricing mechanisms and a return to fair value. Future interest rate movements and evolving supply-demand dynamics across asset classes are expected to influence the recovery trajectory primarily. Logistics and Multifamily Remain Resilient, Office and Retail Showing Signs of Recovery Over the past five years, Europe’s logistics and multifamily sectors have consistently delivered stable total returns, while office and retail sectors have underperformed by comparison. In particular, retail, which experienced negative returns after COVID-19, has recently begun to show signs of a turnaround. According to PMA, the European office sector saw total returns decline to -12% in 2023 but is expected to rebound to 3% in 2024, suggesting a gradual recovery trajectory. Over the medium term, total returns are forecast to stabilize around 6% by 2026–2027, driven by a structural shift in return composition from capital gains to income-based returns. The European retail sector, which posted an average total return of -6.8% from 2018 to 2022, rebounded to 5% in 2024, marking its first notable recovery in five years. Over the same period, the logistics sector maintained a robust average total return of 10.7%. Following a brief correction in 2023, the industry is expected to deliver 5% in 2024 and approximately 8% annually through 2025–2027. With both capital value recovery and rental growth contributing to performance, logistics stands out as a defensive, income-generating asset class. Multifamily assets in Europe also remain relatively stable, having entered a recovery phase after bottoming out in 2023. From 2025 onward, annual total returns will reach 6%, reinforcing the sector’s appeal for long-term portfolios focused on capital preservation and steady rental income. The shift in Investment Allocation by Sector and Geography Investment activity in Europe’s commercial real estate market continues to concentrate in the UK, Germany, and France, with retail and logistics gaining more significant portfolio share. As of 2024, these three countries account for 56% of total transaction volume, with the UK at 28%, Germany at 16%, and France at 12%. Sector-wise, office transactions have declined from 59% in 2020 to 36% in 2024, while retail has grown from 13% to 25% and logistics from 13% to 19%, indicating a diversification trend in sector allocation. Retail assets, which had already undergone repricing before the pandemic due to the rise of e-commerce, are now increasingly viewed as opportunistic plays, especially for distressed-asset investors. In contrast, the logistics sector continues to benefit from secular e-commerce growth, further enhancing its investment appeal. Signs of recovery are also emerging in cross-border capital flows. Foreign investment in European commercial real estate rose 27% year-over-year to USD 31 billion in 2024. Although still below historical averages, the uptick indicates a gradually improving sentiment among international investors. UK CRE Market: Leading the Recovery Amid Deepening Sectoral Polarization In 2024, the UK commercial real estate (CRE) market posted a notable recovery, with total transaction volume reaching approximately USD 19.6 billion—up 19% year-over-year—making it one of the few European markets showing positive momentum. However, a sectoral breakdown reveals diverging trends. While transaction volumes declined across core segments such as office, logistics, and multifamily, activity in retail and data centers increased. According to RCA, office assets accounted for the largest share at 23% of total volume, followed by retail (22%), logistics (20%), and multifamily (20%). Notably, more than half (53.4%) of all transactions were concentrated in London, reflecting continued investor preference for prime urban assets. This trend is driven by expectations of capital value recovery following the peak in interest rates and a persistent preference for core locations. In contrast, regional cities such as Liverpool (4.6%), Sheffield (3.1%), and Manchester (2.7%) captured a significantly smaller share of investment activity. Structural Demand and Capital Inflows in Logistics and Multifamily One of the most salient trends in the UK CRE market in 2024 has been the rising share of logistics and multifamily sectors. Logistics, supported by sustained e-commerce expansion and solid fundamentals, saw its share of transaction volume increase from 7% in 2015 to 20% in 2024. Similarly, multifamily grew from 5% to 20% over the same period, fueled by persistent housing shortages and aging housing stock. While logistics cap rates have rebounded to 6.0% in 2024, asset prices in the Southwest—including Bristol and Swindon—remain approximately 27% below pre-pandemic levels, underscoring emerging opportunities from both a yield and value perspective. In the multifamily sector, 36 out of 38 transactions in 2023–2024 were concentrated in newly developed assets, reflecting demand for new supply and asset refresh strategies. Approximately 37% of these deals involved student housing, with prominent global asset managers expanding their exposure beyond conventional rentals to student accommodation—a segment gaining strategic interest for long-term income generation. By Soyeong Park, Contents Writer Data Analysis & Review by Strategic Research Division, IGIS Asset Management ──────────── -This content has been prepared for informational purposes only and is not intended to serve as a basis for investment decision-making by users. It is not created for the purpose of promoting, soliciting, or recommending financial investment products, providing investment advice, or making stock recommendations. The company makes no express or implied representations or warranties regarding the accuracy or completeness of any materials or information provided in this content. Furthermore, the company assumes no responsibility or liability for any damages or losses incurred because of investment decisions made based on this content. Potential investors shall not raise any objections in this regard. -The above information is based on data as of March 2025 and has been prepared in compliance with applicable laws and internal control standards. The materials and information in this content are subject to change due to changes in market conditions, the stock market, interest rates, inflation, tax policies, and other social, economic, or policy-related factors. Additional risks may arise from asset price fluctuations, exchange rate volatility, credit rating downgrades, declines in real estate prices, investment performance results, or unforeseen natural disasters such as fires, floods, or pandemics. Consequently, financial (investment) products may result in partial or total loss of the principal investment, with such losses being borne by the investor. These products are not protected by the Korea Deposit Insurance Corporation under the Depositor Protection Act. Past performance does not guarantee future returns, and the results may differ from the performance at the time of content creation or in the future. Additional transaction and other costs may also apply. -This content has not been legally submitted or registered, nor has it been approved under any applicable law. It may contain subjective opinions that do not necessarily represent the official views or statements of the company. This content is not intended to solicit, offer, or recommend the subscription, purchase, or sale of securities. Investors have the right to receive sufficient explanations from financial product sellers in accordance with applicable laws. All investment decisions should be made carefully and solely on the information provided in the securities registration statement, (preliminary) investment prospectus, and terms and conditions. Investors should make prudent decisions based on their own judgment. [IGIS Asset Management Co., Ltd. Compliance Officer Review No. 900-25-Ad-051 (April 18, 2025 – April 17, 2026)]

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 ──────────── -This content has been prepared for informational purposes only and is not intended to serve as a basis for investment decision-making by users. It is not created for the purpose of promoting, soliciting, or recommending financial investment products, providing investment advice, or making stock recommendations. The company makes no express or implied representations or warranties regarding the accuracy or completeness of any materials or information provided in this content. Furthermore, the company assumes no responsibility or liability for any damages or losses incurred because of investment decisions made based on this content. Potential investors shall not raise any objections in this regard. -The above information is based on data as of March 2025 and has been prepared in compliance with applicable laws and internal control standards. The materials and information in this content are subject to change due to changes in market conditions, the stock market, interest rates, inflation, tax policies, and other social, economic, or policy-related factors. Additional risks may arise from asset price fluctuations, exchange rate volatility, credit rating downgrades, declines in real estate prices, investment performance results, or unforeseen natural disasters such as fires, floods, or pandemics. Consequently, financial (investment) products may result in partial or total loss of the principal investment, with such losses being borne by the investor. These products are not protected by the Korea Deposit Insurance Corporation under the Depositor Protection Act. Past performance does not guarantee future returns, and the results may differ from the performance at the time of content creation or in the future. Additional transaction and other costs may also apply. -This content has not been legally submitted or registered, nor has it been approved under any applicable law. It may contain subjective opinions that do not necessarily represent the official views or statements of the company. This content is not intended to solicit, offer, or recommend the subscription, purchase, or sale of securities. Investors have the right to receive sufficient explanations from financial product sellers in accordance with applicable laws. All investment decisions should be made carefully and solely on the information provided in the securities registration statement, (preliminary) investment prospectus, and terms and conditions. Investors should make prudent decisions based on their own judgment. [IGIS Asset Management Co., Ltd. Compliance Officer Review No. 900-25-Ad-051 (April 18, 2025 – April 17, 2026)]