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CBRE conducts the Asia Pacific Cap Rate Survey with our capital markets brokers and valuers every six months to obtain insights into current capital markets trends and sentiment along with the latest cap rate movements across individual markets and sectors. This report summarises the survey's key findings.

Below are the key highlights:

• Commercial real estate investment got off to a strong start this year, rising 11% year-on-year to US$33 billion in Q1 2025 on the back of declining interest rates and asset repricing.
• Bifurcation in cap rates was observed across the region. Australia’s shopping malls experienced cap rate compression, while cap rates in Greater China continue to experience expansion pressure.
• In response to tariffs, some 60% of respondents expect investors to reassess the pace of purchasing activity. Mainland China, Hong Kong, and Singapore investors were extremely concerned about the impact of tariffs, while those in Korea, Australia, India, and Japan were somewhat concerned.
• Private (28%) and institutional (12%) investors continued to display the strongest buying intentions. Buying intentions for REITs and real estate funds strengthened from six months previously.
• Net buying intentions were highest in New Zealand (77%) and Australia (48%). Japan attracted the strongest interest from cross-border investors.
• Elevated yields / favourable pricing (63%), potential for rental uplift (44%) and healthy or improving occupancy/rent roll stability (36%) were named as the top three opportunities to improve investment returns.
• Interest in multifamily & build to rent increased significantly (44% vs. 34%) from six months ago, with Japan, Greater China and Australia the main markets of interest. Demand for neighbourhood shopping malls (24% vs. 12%) also picked up from the Q3 2024 survey.
• Data centres (63%) were the clear favourite among alternatives.

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 The Asia Pacific (APAC) real estate sector continues to exhibit moderate growth accompanied by notable progress in the housing segment, industrial and commercial market and sustainable real estate transformation. Strategic improvements in construction practices have also positioned this sector as a key driver of transformation, simultaneously shaping the evolution of real estate projects across the region.

The APAC real estate sector is progressively adopting eco-friendly innovations mainly through investments in renewable energy projects and sustainable urban development. This shift is evident in the evolving real estate regulations within the region for the last three months (December 2024 – February 2025). Countries such as Australia and Singapore have implemented policies and initiatives to foster the adoption of green energy, enhancing the growth and environmental responsibility of their real estate markets. Additionally, the region saw notable growth in commercial and industrial real estate, supported by fundings and redevelopment plans for business and commercial projects.

Aligned with these strategic advancements, APAC economies, including Australia, Singapore, China, Hong Kong, Japan and India, present promising opportunities for investors, driven by regulatory reforms designed to attract various asset classes and types. These nations are expected to play a significant role in directing regional investments and promoting growth in the coming months.

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Overall: We still believe that the interest rate tailwind of slower global growth will support REITs in Asia especially Australia, Singapore and even Hong Kong (see fall in HIBOR). CPI in our region outside of Japan has been trending very much in the right direction.

• Japan (+7% in USD in April): The major developers will publish their annual results in May. After that it will be quiet until October and we see only limited upside potential. We have therefore added to REITs and bought Japan Real Estate Investment Corp.
• Australia (+9%): We continue to favor names like Stockland and Mirvac as we anticipate residential volumes to recover as the RBA cuts throughout the year. We are positive on self-storage due to continued population growth, and potential for more consolidation of unlisted, smaller players.
• Hong Kong (+2.3%): Money market rates continue to fall, the 1M HIBOR is below 2% now. For the short-term refinanced companies in Hong Kong a strong tailwind.
• Singapore (1.7%): We see continued drops in funding costs which will help earnings and fuel acquisition growth for some names that have strong costs of capital. With 1Q updates behind us, we see limited negative catalysts for the sector.

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