APAC Real Estate Investment Fell 18% in Q1 Amid Global Trade Jitters: MSCI

Trades of income-generating real estate in Asia Pacific fell 18 percent to $32.3 billion in the first three months of 2025 compared with year-earlier volume, as investors signalled a pullback amid a wave of uncertainty triggered by US trade policy, according to MSCI.

While most of APAC’s commercial real estate markets endured a decline in first-quarter activity, India escaped the drop as volume in the world’s most populous nation crept up 1 percent year-on-year to $400 million, the data tracker said in its latest report. Australia also bucked the trend, boosting volume by 65 percent to $5.2 billion, but trade in regional giants Japan and China fell 25 percent and 16 percent, respectively, to $11 billion and $8.1 billion.

“For most of Asia Pacific, commercial real estate markets had begun a swift recovery since the middle of last year,” MSCI said. “Any momentum going into 2025, however, was dented by the prospect of a global trade meltdown.”

The story took another turn Wednesday when key elements of the Trump administration’s tariff regime were ruled illegal by a US trade court, sparking fresh questions as the White House immediately vowed to appeal the decision.

Sheds Flop, Beds Rebound

In South Korea, a nation with a large share of economic output reliant on exports to the US, deal volume fell 21 percent to $4.1 billion in the first quarter as a result of a moderate retreat across office and industrial, MSCI said. Those sectors are comparatively more exposed to tariff turmoil, according to the report compiled by a team led by Asia real estate research head Benjamin Chow.

Exports to the US represent an even bigger shock to the smaller markets of Southeast Asia, the report noted, with such shipments making up more than 30 percent of Vietnam’s GDP. China also remains vulnerable to trade fallout, with reduced economic growth in the mainland likely to resonate in Hong Kong as well.

Industrial investment across the region plunged 37 percent to $5.7 billion, with sheds suffering the biggest drop of all the major property types. On the flipside, the three “beds” sectors of hotels, apartments and senior housing saw heavier volume compared with year-earlier levels.

For apartments and senior housing, the result reversed a trend of the previous few quarters in which interest in residential sectors had tailed off as investors began to rotate back into traditional core sectors, according to the report.

“The pall of uncertainty over global trade, however, appears to have reignited interest in the residential sector, as demand drivers are less correlated with the global economy,” MSCI said.

Gaw Shops in Ginza

APAC’s largest single-asset deal tracked by MSCI during the quarter belonged to Hong Kong’s Gaw Capital Partners, which teamed with Singapore-based Patience Capital Group to acquire the Tokyu Plaza Ginza mall in Tokyo’s prime shopping district for $1 billion.

Privately held Gaw is taking over the management and leasing of the 50,093 square metre (539,197 square foot) property and plans to transform the 2016-vintage mall into a “vibrant” retail destination. Patience, a Japan-focused private equity firm led by former GIC executive Ken Chan, is helping to refresh the tenant mix.

In the quarter’s biggest industrial transaction, Sharp sold an LCD panel factory in Greater Osaka to SoftBank for $663.7 million, with the Tokyo-based tech investor poised to convert the asset into an AI data centre.

Japan also played host to the top hotel trade in the year to date, with SC Capital Partners’ Japan Hotel REIT buying the Hilton Fukuoka Sea Hawk from Mizuho Leasing for $414.6 million. The Mizuho affiliate, which on several occasions has acted as an intermediary to purchase properties on behalf of Tokyo-listed REITs, had acquired the 1,053-key property from Singapore sovereign giant GIC last September.