Cap rates across the Asia Pacific region maintained stability in the second quarter of 2025, despite varying market dynamics, according to Colliers’ latest report. The Q2 2025 Asia Pacific Cap Rate Report reveals that the retail sector emerged as the standout performer, driven by stable yields and robust tenant demand in key cities such as Hong Kong, Bengaluru, Sydney, and Melbourne.
Retail assets in Hong Kong continued to deliver attractive yields, outperforming other sectors, whilst Bengaluru experienced rising rents in prime locations due to increased trade density. In Australia, retail yields remained stable, with potential for compression in undersupplied sub-markets.
The office sector displayed varied performance, with sustained demand for high-quality assets in Central Business Districts. Australia and Auckland showed signs of stabilisation, whilst Seoul and Mumbai recorded healthy leasing demand and rental growth. Hong Kong’s office market sentiment improved following a significant transaction at One Exchange Square.
The industrial sector presented mixed dynamics, with strong investor confidence in select markets like Brisbane and Sydney, contrasted by challenges from oversupply and trade tensions elsewhere. Bengaluru recorded notable cap rate movement, highlighting its growing appeal among investors.
Emerging trends include a surge in interest in Hong Kong for converting hotels and offices into student housing, driven by government initiatives. Singapore may face downward pressure on cap rates due to tight supply and demand for trophy assets, whilst Bangkok is positioning itself as a regional data centre hub.
Macroeconomic factors also influenced investor sentiment, with expectations of interest rate cuts in Seoul and recent reductions in Mumbai boosting confidence. China’s RMB138 billion subsidy programme is anticipated to continue stimulating retail consumption.
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