Asia-Pacific's commercial real estate markets are experiencing unprecedented divergence as trade tensions and recent policy shifts reshape global supply chains. What was once a relatively uniform regional growth story has fragmented into distinct trajectories, with some markets thriving amid the disruption while others face structural challenges, even as temporary relief emerges through trade negotiations.
Knight Frank's latest Horizon Report, "From Whiplash to Resilience: Corporate Real Estate in the New World Order", documents this divergence in granular detail. It reveals how the "China+N" strategy, the evolution of supply chain diversification beyond a single backup location, creates clear winners and losers across the region's property markets.
The traffic light map: Market-by-market impact
Strong outlook: Indonesia and India
Indonesia has emerged as a key beneficiary of supply chain diversification, with manufacturing and logistics demand projected to grow 15% to 20% over the next 12 to 24 months. This growth is concentrated in the electronics, automotive, and logistics sectors, which seek to establish regional manufacturing nodes that complement or replace the facilities of the Chinese mainland. The country's large domestic market provides additional insulation from trade volatility, while its strategic position within ASEAN trade networks offers operational advantages.
In real estate, Indonesia is experiencing rapid evolution in demand patterns and development approaches. Purpose-built facilities are increasingly displacing speculative projects as occupiers prioritise customisation and operational efficiency over speed-to-market. Developers report a growing preference for built-to-suit or build-to-rent arrangements with long-term agreements.
India presents a different but equally strong growth story. While its manufacturing sector continues to expand, India's most remarkable performance has been in office markets, dramatically increasing its share of Asia-Pacific leasing activity from 36% in 2015 to 47% in 2024. This translated into 6.68 million square meters of record-breaking transactions in 2024, driven by IT companies, Global Capability Centres, and multinational firms attracted by India's deep talent pool and competitive costs.
India's relative insulation from direct tariff impacts, strong domestic growth fundamentals, and established technology sector strengths have positioned it as a commercial real estate haven amid regional uncertainty. Developers are responding with significant new supply, yet absorption rates remain healthy and rent growth stable across major markets.
For investors, India's office market strength offers a compelling counterbalance to industrial sector volatility elsewhere in the region. For corporate occupiers, India's combination of talent depth, operational scale, and relative economic stability provides an increasingly important pillar in regional portfolio strategies.
Cautious outlook: Vietnam and Malaysia
Vietnam presents a more complex picture in light of recent trade developments. Having been the primary beneficiary of the initial "China+1" wave, with logistics demand growing 17.2% between 2020 and 2024, Vietnam now navigates a more nuanced landscape. While the recent 90-day US-China tariff reduction provides some breathing room, investors and occupiers remain strategically focused on diversification. Knight Frank's research indicates a projected 15 to 20% increase in manufacturing space demand, with international occupiers expressing heightened interest in large logistics facilities exceeding 100,000 square meters.
This resilient interest reflects Vietnam's strategic position: while direct exports to the US continue to face tariff considerations, its role in regional supply chains and intra-Asian trade flows remains valuable. Relocation activity is maintaining momentum even during the negotiation period, with manufacturers securing flexible facilities that can adapt to evolving trade patterns.
Malaysia similarly shows mixed signals. Investors remain cautious about new commitments, yet the country has experienced "a significant increase in enquiries from Chinese manufacturers," according to market participants. Malaysia's established infrastructure, technical capabilities in electronics and semiconductors, and political stability continue to attract interest despite trade headwinds.
Evolving outlook: The Chinese mainland
Structural challenges persist in the Chinese mainland markets. Office sectors in key cities have shown sustained imbalance, with rising vacancies and persistent rental declines extending through 13 consecutive quarters.
While somewhat more resilient due to domestic demand, industrial markets continue to experience pressure as export-oriented manufacturers maintain strategic diversification plans despite the temporary tariff reduction. Properties aligned with government priorities in AI, green technology, and domestic consumption will likely show greater resilience than those dependent on export-oriented manufacturing.
For more insights, please download the latest edition of Knight Frank’s Asia-Pacific Horizon series, Whiplash to Resilience: Corporate Real Estate in the New World Order, report below.
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