Asia Pacific commercial real estate investment surges to record USD 47.0 billion in Q1 2026

Hong Kong, 19 May 2026 – Asia Pacific commercial real estate (CRE) investment volumes totalled USD 47.0 billion in Q1 2026, representing a 31% year-on-year (YoY) increase, according to data from JLL. This marked the region's strongest first-quarter performance on record, underlining sustained investor confidence and market resilience despite heightened caution stemming from the Middle East conflict that emerged in late February and its implications for global energy markets.

The region continued to demonstrate strength in large-scale cross-border transactions, with cross-border capital flows reaching a quarterly high of USD 16.3 billion, up 87% from the same period last year.

In Hong Kong, CRE investment volumes rose 41% YoY to USD 1.6 billion in the first quarter, supported by easing financing conditions and renewed interest in core office and retail assets. Lower borrowing costs helped alleviate pressure on developers, with the one-month HIBOR declining from 3.1% at end-December 2025 to 2.2% by end-March 2026, providing greater financial flexibility and supporting transaction activity.

The office sector saw improved liquidity during the quarter, as asset prices in core locations approached a near-term floor. Notable transactions included Dah Sing Financial Holdings' USD 107 million acquisition at Viva Place and Golden Diligent Ltd's USD 32 million purchase at Lippo Centre. Retail investment activity also strengthened, led primarily by acquisitions from mainland Chinese F&B owner-occupiers. While distressed retail assets continued to transact, price discounts have moderated, with initial yields compressing from around 9.4% in Q4 2025 to approximately 6.4% in Q1 2026.

Notably, rising education demand is emerging as a structural driver reshaping the investor and buyer landscape. Supported by the government's ongoing efforts to position Hong Kong as a regional education hub, education institutions have become increasingly prominent buyers of office and retail assets. This shift has sustained strong investor interest in residential assets, hotels and commercial properties with conversion potential into Purpose-Built Student Accommodation (PBSA), which offers more resilient demand and comparatively attractive return prospects.

Oscar Chan, Head of Capital Markets at JLL in Hong Kong, said: "Escalating geopolitical tensions in the Middle East lead to supply-side inflationary pressures and heighten uncertainty around the interest rate outlook, prompting a more cautious investor stance. As a result, any recovery in the commercial property market is expected to remain highly selective, with activity concentrated on prime assets amid persistently weak occupier demand across the broader market. However, with Asia increasingly perceived as a relatively stable and defensive investment destination, we expect institutional investors from the Middle East to rebalance their portfolios with increased capital allocation to the region, with Hong Kong well positioned to benefit as a key recipient of such inflows."

In the first quarter, Singapore recorded the strongest YoY growth in CRE investment across Asia Pacific, with volumes rising 433% to USD 11.5 billion. The sharp increase was driven largely by asset transfers by Hongkong Land and the Qatar Investment Authority to the mega-fund SCPREF, which accounted for USD 6.4 billion of total market activity. A favourable financing environment also underpinned investment across sectors, including retail portfolio acquisitions by Altallo AM and industrial assets acquired by UI Boustead REIT.

Japan remained the region's largest and best-performing market, with CRE investment reaching USD 13.2 billion in the first quarter, despite a 4% YoY decline. Office assets continued to dominate activity, as owner-occupiers sold large, ageing headquarters buildings in Tokyo's CBD to major domestic developers for refurbishment. Notably, Brookfield's acquisition of Dentsu's headquarters from Hulic accounted for approximately USD 1.9 billion of total investment volume.

The office sector led investment activity in the first quarter, recording USD 24.0 billion of transactions, a 46% YoY increase that accounted for more than half of total regional volume. The industrial and logistics sector also posted robust growth, with investment rising 53% YoY to USD 8.5 billion. However, this performance reflects selective resilience, as capital remains focused on high-quality logistics assets amid strengthening fundamentals across major markets.

"Despite a record-breaking start to 2026, Asia Pacific economies remain exposed to energy price shocks stemming from recent geopolitical developments. Japan and South Korea face the highest risks, sourcing approximately 93% and 67% of their oil consumption from the Middle East, respectively. A prolonged conflict could give rise to stagflationary pressures, forcing central banks to maintain restrictive policy settings even as economic growth slows," said Stuart Crow, CEO, Asia Pacific Capital Markets at JLL. "In the near term, capital is expected to remain concentrated in liquid, mature markets such as Japan and Singapore, where market depth can help mitigate underlying energy-import exposure. Meanwhile, elevated energy-related construction costs are likely to further constrain new development pipelines in markets already facing structural supply shortages, reinforcing the income and capital value proposition for well-positioned assets."

Learn more in JLL's Q1 2026 Capital Tracker.