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CBRE's recently released Q1 2025 report for the Asia Pacific region reveals varied performance across the real estate sectors. While office leasing showed strong growth, especially due to upgrading and relocation demand, commercial real estate investment volumes dipped slightly by 1% quarter-on-quarter (q-o-q), totalling USD 32.8 billion. The office market saw a 25% year-on-year (y-o-y) improvement in net absorption, and retail leasing sentiment remained optimistic. However, the logistics sector faced increased vacancy rates as occupiers hesitated due to global trade uncertainties. Investment activity was primarily boosted by Japan and Korea, with office sector investments outperforming others.
CBRE's latest Asia Pacific Q1 2025 report offers an in-depth look into the region's economic performance, real estate investment market, and key sectors including office, retail, and industrial properties. Advertisement
Ada Choi, Head of Research for CBRE in Asia Pacific, explained that office leasing across the region had a strong start in 2025, driven by consistent demand for upgrading and relocation. She noted that while the investment market remained healthy, supported by falling interest rates in most markets, both investors and occupiers were expected to take a cautious, 'wait-and-see' stance in the short term, especially as U.S. trade policies continued to evolve.
In terms of investment, Asia Pacific's commercial real estate market saw a slight drop of 1% quarter-on-quarter (q-o-q) in transaction volumes, amounting to USD 32.8 billion in Q1 2025. However, this represented an 11% year-on-year (y-o-y) increase. The overall dip in investment was offset by a surge in transaction volumes in markets such as Japan and Korea, with office sector investments standing out with a remarkable 42% q-o-q increase. The majority of these office deals were concentrated in Japan, making it the standout performer in this sector.
The office sector also experienced positive momentum, with Grade A office net absorption improving by 25% y-o-y, totalling 17.2 million sq. ft. in Q1 2025. This was attributed to rising demand in markets across Asia, particularly from the finance and technology sectors. Vacancy rates across Asia fell by 0.4% q-o-q to 18.5%, with most markets showing a decline. Rents were largely stable compared to the previous quarter. Richard Stevenson, Head of Office Occupier, Asia Pacific at CBRE, shared that the office market had seen an encouraging start to 2025, with an uptick in enquiries and site inspections. He also pointed out that although landlords in Japan and India were gaining stronger leverage in lease negotiations, there were still opportunities for tenants who planned their leases well in advance.
The retail leasing market also showed positive signs, with increased tenant enquiries and site inspections. The demand remained heavily driven by the food and beverage (F&B) sector, and vacancy rates remained stable in most markets. Rents saw a modest increase of 0.5% q-o-q.
The logistics sector, however, presented a more cautious outlook. While leasing activity remained solid in major markets, an influx of new supply and ongoing global trade uncertainties led to a more conservative approach from occupiers. Leasing was primarily driven by domestic third-party logistics (3PL) providers, fast-moving consumer goods (FMCG) companies, and retailers. Vacancy rates in logistics properties continued to rise, driven by the new supply.
Michael Bowens, Managing Director and Head of Industrial & Logistics, Advisory & Transactions Services for Asia Pacific at CBRE, observed that although leasing activity had improved slightly in recent months, especially due to increased demand from the 3PL and e-commerce sectors, some occupiers were holding off on leasing decisions while navigating through uncertainties surrounding global trade policies.
Investment volumes have shown moderate growth, and despite a slight dip in commercial real estate investment, some markets, notably Japan and Korea, are experiencing notable activity. The overall sentiment in the region suggests cautious optimism, with many investors and occupiers adopting a wait-and-see approach as global trade dynamics evolve.
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