Office investment picked up in the second half across markets including Australia, South Korea, Hong Kong and Singapore.

Asia-Pacific Office Investment Hits Three-Year High in H2 2025

Asia-Pacific commercial real estate investment surged to its highest level in three years during the second half of 2025, with office assets accounting for a disproportionate share of total transaction volume across key markets. Australia, South Korea, Hong Kong, and Singapore all recorded meaningful upticks in office deal activity, driven by a combination of stabilising interest rates, compressed cap rates in core CBD locations, and renewed appetite from institutional investors who had largely sat on the sidelines since 2022. The recovery marks a decisive shift from the subdued transaction environment that characterised much of 2023 and 2024, when elevated borrowing costs and valuation uncertainty kept deal volumes suppressed.

• APAC office investment growth (H2 2025 vs H2 2024): +28% year-on-year
• Singapore Grade A office yield (CBD core): 3.6%–3.9%
• Sydney CBD prime office yield: 5.2%–5.6%
• Seoul Gangnam office average PSF (transaction): KRW 18.5 million–22 million per pyeong
• Hong Kong Grade A office vacancy (Central): 11.4% (down from 13.1% in H1 2025)

Market Context: Which Cities Led the Recovery?

Australia emerged as the most active market by deal count, with Sydney and Melbourne CBD office towers attracting both domestic superannuation funds and offshore capital from Japan and South Korea. Several large-lot transactions above AUD 300 million were recorded in Sydney's core precinct, with prime yields firming modestly as buyer competition returned. The repricing that took place through 2023 and 2024 — in some cases delivering 15%–20% discounts to 2021 peak valuations — appears to have created a sufficiently attractive entry point for long-term institutional holders.

South Korea's office market, particularly in Seoul's Gangnam and Yeouido districts, continued to benefit from extremely tight vacancy conditions. Grade A vacancy in prime Seoul locations remained below 3%, sustaining landlord pricing power and supporting capital values even as global rate uncertainty lingered. Several domestic asset managers and Korean insurance companies were active acquirers, while cross-border interest from Singaporean and Australian fund managers also increased through the second half of the year.

Hong Kong showed early signs of stabilisation after a prolonged correction. Central district vacancy eased from 13.1% in the first half to 11.4% by year-end, and at least two significant en-bloc transactions were completed in the Admiralty and Wan Chai submarkets. Pricing remains well below 2019 peak levels — in some cases 30%–40% lower on a PSF basis — which has begun attracting opportunistic capital from mainland Chinese institutions and select global value-add funds.

Singapore: Tight Supply Underpins Pricing Resilience

Singapore's office market continued to demonstrate structural resilience, with Grade A CBD rents holding firm and investment yields compressing further into the 3.6%–3.9% range for trophy assets. Limited new supply coming to market through 2026 and 2027 — a consequence of the restricted land release environment and long development lead times — is expected to keep vacancy low and support capital values. Several strata office floors in Raffles Place and Marina Bay transacted above S$3,500 per square foot in H2 2025, setting new benchmarks for the submarket. Singapore continues to attract pan-Asian capital as a perceived safe-haven allocation within the broader APAC office universe.

What This Means for Office Investors Across Asia-Pacific

The H2 2025 data presents a clearer picture for investors weighing office allocations: the correction phase is largely over in core markets, and the window for distressed or deep-value acquisitions is narrowing. Markets like Sydney and Hong Kong still offer yield spreads that are attractive relative to Singapore, but the discount is compressing as more capital chases fewer available assets. Investors who can underwrite vacancy risk in Hong Kong or execute value-add repositioning in Australian secondary CBD locations may still find risk-adjusted returns that justify the complexity.

Looking into 2026, the key variable across all four markets will be the trajectory of global interest rates and whether central banks in the US and Europe deliver the rate cuts currently priced into forward curves. A sustained easing cycle would further compress real estate cap rates, accelerating capital appreciation for investors who have already entered. Conversely, any reversal in rate expectations could slow deal velocity once again. For now, the weight of institutional capital flowing back into APAC office assets suggests that the market consensus has shifted firmly toward recovery — and investors waiting for a second dip may find themselves waiting in vain.

Frequently Asked Questions

Which Asia-Pacific office market offers the highest investment yields right now?

As of H2 2025, Sydney CBD prime office assets are yielding approximately 5.2%–5.6%, making Australia the highest-yielding core office market among the four key APAC markets tracked. Singapore's Grade A CBD yields sit at 3.6%–3.9%, reflecting its lower risk premium and tighter supply environment. Hong Kong offers potentially higher returns but carries greater vacancy and demand-side risk.

Why did Hong Kong office vacancy start declining in H2 2025?

Hong Kong's Central district vacancy eased from 13.1% to 11.4% over the course of H2 2025, driven by a combination of limited new supply entering the market and a gradual return of financial services and professional services tenants to the CBD. Opportunistic leasing activity also picked up as landlords offered more competitive incentive packages to secure longer-term commitments.

Is Seoul's office market still a viable entry point for foreign investors?

Seoul remains highly competitive for foreign investors due to sub-3% vacancy in prime districts and strong domestic demand from Korean institutional buyers. Entry pricing is not distressed, but the structural supply-demand imbalance supports stable income returns. Foreign investors typically access the market through joint ventures with local asset managers or via Korean real estate funds.

What is driving the recovery in APAC office investment volumes?

The primary drivers include stabilising global interest rates reducing financing cost uncertainty, a repricing of assets in markets like Australia and Hong Kong that created more attractive entry valuations, and a return of institutional investor mandates that had been paused during the 2023–2024 high-rate environment. Improving occupancy fundamentals in most markets also gave buyers greater confidence in underwriting rental income.

How does Singapore's office market compare to other APAC cities for capital preservation?

Singapore is widely regarded as the most defensively positioned office market in Asia-Pacific, supported by restricted land supply, a stable regulatory environment, and consistent demand from multinational corporations using the city as their regional headquarters base. Lower yields reflect this lower risk profile. For investors prioritising capital preservation over income maximisation, Singapore Grade A office assets remain a benchmark allocation within APAC portfolios.