After two years of stubborn inflation, higher-for-longer rates, and rolling geopolitical shocks, Asia-Pacific (APAC) real estate will enter 2026 with a clearer sense of direction.
Growth is set to moderate, with APAC GDP easing from 4.5 per cent in 2025 to about 4.1 per cent in 2026, though the region will still account for more than half of global expansion, supported by artificial intelligence (AI)-led tech investment, strengthening intra-regional trade and resilient domestic demand across major emerging economies.
For investors and occupiers, the message is clear: this is no longer a 'rising tide lifts all boats' market. Real estate is moving into a phase where outcomes and returns are driven less by broad market forces and more by deliberate, operational value creation.
Despite a heavy new-supply year, the Asia-Pacific office market has proved more resilient than many expected. In 2025, more than 10 million square metres of new stock came on stream, yet vacancies have largely held near 2024 levels at around 15 per cent. Financial and tech occupiers drove nearly half of all leasing, led by India’s expanding Global Capability Centres (GCCs, i.e., offshoring hubs) and renewed demand around Hong Kong’s IPO revival.
Even though the office market looks resilient on the surface, something more important is changing underneath. Office tenants are using space differently and placing value on different things than before. In 2026, the core office narrative will be shaped by three themes:
In 2026, the core office narrative will be shaped by three themes:
Corporate real estate leaders are still laser-focused on cost discipline, but increasingly see cost decisions to support business transformation. Higher fit-out costs, lingering macro uncertainty and AI-driven workplace change are forcing companies to ask not just “How much space do we need?” but “What kind of space will actually move the needle on productivity, culture and talent?”
The result is a continued gravitation towards high-quality, ESG-compliant space in core locations. Even in markets where headline rental growth is flat or negative, such as parts of the Chinese mainland, top-tier buildings continue to outpace the rest. According to Knight Frank, in core Asia-Pacific cities, top prime Grade A offices command rent premiums of between 15 and 20 per cent over Grade B space. Older and less efficient buildings are fast becoming obsolete unless owners step in to reposition them.
For investors, this bifurcation creates opportunity. Value-add strategies around “brown-to-green” repositioning, retrofits, and amenity upgrades are likely to drive performance, particularly in markets like Singapore, Australia and Japan, where there is a larger share of ageing buildings.
The 2025 leasing cycle was dominated by renewals, as corporates delayed relocation spending. That deferral cannot continue indefinitely.
With regional development pipelines set to drop by more than a third in 2027, 2026 looks increasingly like an inflection point. Occupiers that need to upgrade into future-ready space will find more options and stronger negotiation power, if they act before new supply tightens.
This points to two directions. Occupiers should use 2026 as a window to explore while terms are still favourable, rather than simply rolling their leases forward. They can consider test-fitting options, securing flexibility on lease lengths and expansion rights. Landlords, meanwhile, will need to offer more options through shorter leases, fitted or managed spaces, and even fit-out subsidies to attract demand from tenants rethinking their portfolios.
Flex space is no longer just a fringe solution for start-ups. Managed offices and hybrid models are gaining traction with large occupiers who want customisation and privacy without full capital expenditure (CapEx) exposure. In a world where trade shocks, tariff changes and AI’s impact on headcount remain uncertain, the ability to dial space up or
down without being locked into a five-year lease will be a competitive differentiator. Expect more core buildings to incorporate a flex component as standard, and more investors to view flex as part of a risk-management toolkit rather than a threat.
The extraordinary logistics rent-upcycle that followed the pandemic is now over. By end-2025, Asia-Pacific logistics rents were essentially flat on a regional index basis, dipping marginally as occupiers grew more cautious and new supply caught up with demand.
The outlook for 2026 is best described as “disciplined normalisation” rather than a downturn.
With pipeline supply in 2026 roughly on par with 2025, headline rental growth is expected to remain subdued, generally below 2 per cent across much of the region. Chinese mainland markets face particularly stiff headwinds as elevated supply in districts such as Beijing’s Pinggu and Shunyi adds pressure to rents, even as it creates more options for occupiers. Australia’s Eastern Seaboard will also see landlords remain flexible as significant new projects reach completion in Sydney and Melbourne.
Below the surface, however, a more varied picture is emerging. India continues to post robust take-up, supported by manufacturing growth, while Southeast Asia’s key logistics hubs, including Greater Jakarta, Singapore, Kuala Lumpur, Bangkok, and Manila, are benefiting from their role in a more diversified regional supply chain.
The tariff environment may be volatile, but it is not prompting wholesale rewiring of global supply chains. Instead, companies are adopting a measured “China plus” strategy that spreads manufacturing and sourcing across Southeast Asia and India while maintaining core operations in China.
That incremental rebalancing underpins demand for modern, high-specification warehouses in markets with improving infrastructure, competitive labour and trade-friendly policies. The strongest opportunities in 2026 are likely to be in locations with reliable connectivity to ports, airports and consumption centres, backed by scalable institutional-grade assets and stable regulation.
Occupiers are likely to focus on building more resilient supply chains by using data and technology as growth enablers, while taking advantage of still-favourable leasing terms to explore new options. Landlords will look to position portfolios for rising intra-regional trade, particularly in Southeast Asia, invest in urban logistics, and bring greater flexibility into lease structures to align with shifting tenant needs.
If 2023 and 2024 were the years of price discovery and cautious capital cycle, 2025 marked a clear inflection point. Asia-Pacific commercial real estate investment rose more than 9 per cent in the first nine months of the year, lifted by stronger domestic and cross-border activity and several large entity-level deals. With about US$40 billion of transactions in the pipeline, 2025 is on track to end the year 10 to 15 per cent above 2024 levels.
The stage is set for another year of incremental recovery in 2026.
As central banks across most of the region near the end of their easing cycles and the Fed is expected to trim rates again, funding costs are declining further. Combined with the asset repricing already under way, this is narrowing bid–ask spreads and bringing more assets to market, particularly from sellers looking to rebalance portfolios. Investment volumes are expected to rise by a further 5 to 10 per cent in 2026. This is a solid step toward a more normalised transaction environment in the higher-for-longer interest rate landscape.
The days when investors could rely on cap rate compression to do the heavy lifting are over. Unsurprisingly, value-add strategies now dominate the fundraising landscape for APAC-focused real estate funds, outnumbering core and core-plus strategies. Managers are leaning into sectors where they can create or unlock income growth. Through-the-cycle sectors, particularly data centres, living sectors and life sciences are likely to be in demand for both their income-producing and defensive qualities. Operational expertise is crucial given the specialised nature of these asset classes, which gives investors the room to create alpha.
Office retrofit and conversion, especially in markets with clear bifurcation between prime and secondary stock, will also be a key theme. So too will adaptive reuse – from secondary offices and older retail into living, purpose-built student accommodation
(PBSA) or mixed-use development in cities where housing for locals and students is structurally undersupplied.
Fundraising trends support this rotation. While overall volumes remain below the 2021/2022 peak, capital raised in the first half of 2025 already reached 80 per cent of 2024 levels, with average fund sizes rising sharply as larger vehicles close. With pricing firmer and financing windows reopening, managers are entering 2026 in a stronger position to deploy capital with greater conviction.
The backdrop for 2026 is neither exuberant nor dire. Growth is slowing but still solid, geopolitical risk is elevated but not punitive. For office, logistics and capital markets, that translates into a landscape where structural themes such as AI, supply-chain diversification, and demographic shifts, matter more than headline volatility.
For occupiers, the challenge will be to use this window of opportunity to secure quality space with the functionality required to support business transformation, before the development tap tightens again.
For investors, the opportunity lies in allocating capital toward the most resilient sectors and sub-markets, as well as building the operational capabilities needed to generate alpha as the market and funding cycle normalise.
In other words, 2026 is a year for value hunting, not bottom fishing.
The writer is the Head of Asia-Pacific Research at property consultancy Knight Frank.
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Notes to Editors
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