Asia Pacific Capital Tracker 2025 Mid-year Perspective

• Cross Border Investment Growth: Asia Pacific attracted USD 6.7 billion in Q2 2025 (H1: USD 15.29 billion), marking 86% YoY growth (H1: 118%)
• Flight to Safety: Investors, particularly private wealth up 32% YoY to USD 4.7 billion in Q2, are gravitating toward stable markets and sectors that are highly transparent amid global uncertainty.
• Return-Driven Strategy Shift: levered IRRs are adjusting with several markets seeing premiums above cost of debt; strategies are pivoting from cap rate compression to active management for NOI growth across APAC.
• Evolving Investment Criteria: In mature sectors like retail, investors are looking beyond cap rates to value drivers such as operational efficiency, redevelopment potential, and sustainability credentials.
• Sector Resilience: Markets with strong domestic corporate bases will be less impacted by tariffs than those reliant on global trade. Peak policy uncertainties has subsided but upside risks of weakening economic growth remains.
• Sustainability Focus: Performance-based metrics have replaced symbolic certifications as investment criteria, with energy efficiency and renewable integration now prioritized over traditional green building certifications.
• Energy Transition Opportunity: Battery Energy Storage Systems (BESS) showing the highest growth potential among renewable technologies as costs decline.

The second quarter of 2025 alone contributed USD 31.2 billion to regional investment volumes, representing a 15% year-over-year (YoY) increase, despite extended due diligence timelines amid ongoing uncertainties.

Japan remained APAC's strongest performer, leading the region with USD 7.6 billion in Q2, driven by a bullish office sector. The living sector also surged in activity as J-REITs and foreign buyers maintained strong interest in multifamily assets. The strongest quarterly growth came from South Korea where investment volumes surged by 72% YoY to USD 6 billion. Sellers sought to divest office ahead of new supply while cross border capital zeroed in on industrial and living sectors. Investment in China reached USD 5.2 billion, with private capital from insurers providing crucial liquidity. Hong Kong's investment volumes grew 32% YoY, boosted by a sizable office acquisition. Investment activity in Australia softened though momentum remains robust at USD 4.9 billion dominated by industrial and logistics trades. Singapore trading was subdued as bid-ask gap widened following rate declines.

Despite global macro uncertainties, Asia Pacific continues to attract significant cross-border investment, with volumes reaching USD6.7 billion in Q2 2025. This represents a substantial 86% year-on-year increase, underscoring the region's enduring appeal to global investors. Japan led with the highest volume of cross-border capital, primarily directed to the living and industrial sectors. In Australia, foreign capital has been actively forming joint ventures with domestic groups to acquire assets, particularly in the student accommodation and industrial sectors. India has seen renewed interest from foreign capital in retail and office assets, while Singapore attracted investment into its industrial and hospitality sectors. In Korea, foreign investment volumes in H1 2025 surged fourfold into the logistics and industrial and living sectors.

Chances of a Fed rate cut at the July 30 FOMC meeting are slim but expected in September as economic growth slows (U.S. GDP contracted 0.5% QoQ in Q1 2025 — the first quarterly contraction in three years) and unemployment rises. Overall U.S. CPI increased 2.7% YoY in June 2025 and the Fed’s June report noted import taxes due to tariffs have already started feeding into inflation for goods.

While the number of forecast cuts has decreased in the U.S., it has increased elsewhere since tariff announcements. APAC central banks have been on a reduction spree — In Australia, RBA cut rates in Feb and May 2025 to 3.85% from 4.35%. In India, RBI made its third rate cut since Feb, with policy rates reaching 5.5%, the lowest level since Aug 2022. Similarly in Korea, policy rates are at the lowest since Aug 2022 at 2.5%, after its fourth cut in May 2025. In China: 1-year and 5-year LPR was cut by 10bps to 3% and 3.5% respectively.​

YTD Cost of debt has come down by ~30bps in Korea, ~45-70bps in Australia and Singapore, and by ~200bps in Hong Kong in Q2. Interest rate cuts in 2H 2025 remains where growth is revised downwards for all economies. Australian futures markets have priced in a cash rate of circa. 3% by the end of 2025 which would imply potentially another 85 bps of potential rates cuts from current levels (3.85%).

In early May, the Hong Kong dollar (HKD) strength led the HKMA to sell HKD and buy the greenback to maintain its currency peg, injecting HKD supply into the banking system, reducing HIBOR to its lowest level since 2022. Subsequently in June, lower HIBOR and capital outflows from the carry trade weakened HKD and triggered the opposite intervention. HKMA bought HKD and sold USD, draining liquidity causing the HIBOR to start rebounding. The lower acquisition/refinancing debt may spur investment activity for a window, as HIBOR will likely reach parity with USD SOFR after intervention stabilises. ​

Japan 10Y bond yields touched its highest level since 2008 in July 2025, as markets focused on Japan’s fiscal concerns amidst high debt/GDP ratio. The uptick shows the vulnerability of its bond market after the BOJ gradually started trimming its balance sheet and scaling back its bond purchasing program. The country’s central bank owns more than half the nation’s sovereign notes and other buyers have not stepped in enough to fill the gap. The better than expected 15% tariff on trade with U.S. gives the BOJ more leeway to increase rates causing bond yields to rise further. Although this could potentially lead to higher cap rates and downward pressure on valuations, CRE fundamentals remain strong.

While peak policy uncertainty has subsided, investors continue to navigate the complexities of the global trade landscape. With tariff rates still being finalized, investors are factoring in slower-growth scenarios and incorporating longer timelines for due diligence. This environment has sharpened the focus on tenant defensibility and asset resilience. As the market adapts, a potential repricing of assets may emerge as rental growth forecasts are revised

According to a recent JLL survey, sectors driven by domestic demand, such as living, life sciences and healthcare, are perceived as the most insulated from geopolitical risk. In contrast, sectors like industrial and logistics, energy, and retail are seen as more exposed.