Asia Pacific benefits from unique structural drivers that will continue to support real estate demand and values over the long term. The region continues to gain from population growth, the rise of the middle class, increased mobility, ongoing infrastructure investment, and deepening intra-regional trade cooperation. Forward-looking growth is expected to remain positive, though likely to be more moderate than the exceptional performance of the past decade as economies have matured.
Real estate in Asia Pacific has shown its resilience across past economic cycles. Each cycle acts as a filter—leaving behind only the most robust assets, strategies, and stakeholders. The result is a more adaptable and refined market. However, resilience is not universal. Outcomes depend on geography, sector, and timing. At every stage in the cycle, it is essential to distinguish good value from value traps, and long-term growth stories from short-term momentum swings.
We believe Asia Pacific’s combination of nascent and maturing markets presents compelling opportunities for the next decade of real estate investing. The strength of the region lies in its ability to offer both value and growth - enabling investors to construct a well-balanced, forward-looking portfolio.
Investing in Asia Pacific is, fundamentally, an investment in the future. We intend to illuminate that future by drawing on insights from the past, anchoring ourselves in today’s realities, and outlining the trends we believe will shape the years ahead. We believe it’s not binary whether to invest in Asia Pacific; it’s about navigating where the momentum lies, what’s investable, and when the window is open.
To answer these, we explore a few critical dimensions:
1. How has Asia Pacific private real estate performed historically relative to other regions and asset classes?
2. What are the key structural reasons to invest in Asia Pacific real estate today?
3. From Growth to Value – which opportunities stand out across markets?
4. What risks or shifts could alter the outlook—and how should investors prepare?
Private Real Estate vs. Other Asset Classes
Private investment vehicles are traditionally aimed at minimizing volatility and seeking higher returns for investors. While limited volatility has held, generating outperformance has been challenging in recent years.
TOTAL RETURNS ACROSS REGIONS AND ASSET CLASSES (%) P.A.
Source: Bloomberg, ANREV, INREV, NCREIF
Notes: Indices used are the following: FTSE EPRA NAREIT US Index, FTSE EPRA NAREIT Dev Europe Index, FTSE EPRA Nareit Developed Asia Index, Russell 3000, MSCI Europe Index, MSCI AC Asia Pacific Index, Bloomberg US Agg Total Return, Bloomberg EuroAgg Total Return, Bloomberg Asia Investment Grade Bond Index, U.S. ODCE TR Index, Europe ODCE TR Index, Asia Pacific ODCE TR Index
But perhaps when we apply some historical context, Asia Pacific core real estate has generally demonstrated relatively stable and attractive performance. From 2005 to 2024, the sector has delivered a total return of 7.45% p.a. marking the second highest asset class performance across a mix of asset classes globally.
However, looking ahead, a “higher for longer” rate environment and a steeper yield curve will make it harder to replicate past performance. Investors will need to work harder to uncover true value, drive stronger income growth, and explore new or overlooked sectors to build institutional-quality assets and gain early-mover advantage – this is the angle investors in the region are taking today.
TOTAL RETURNS P.A. (2006 to Q1 2025)
Source: Bloomberg, ANREV, INREV, NCREIF
Notes: Indices used are cited above
Asia Pacific vs Europe & the US: Clear Contrasts
SUMMARY OF DIFFERENCES: ASIA PACIFIC VS EUROPE AND THE U.S.
Sources: AEW Research, CBRE, MSCI, Real Capital Analytics
There is no disputing Asia Pacific’s real estate sector is smaller in scale and less liquid than Western counterparts. According to MSCI estimates, the size of the institutional real estate market in Asia Pacific is only a fraction of that in the U.S. and Europe. Transaction volumes tell a similar story, where Asia Pacific real estate trades at about half the volume of those in the West in any given year.
However, when analyzing buyer participation, measured by the number of distinct institutional investors active over a period, a different picture emerges. Real estate is inherently local, and across all regions, most transactions are driven by domestic institutions. In Asia Pacific, the count of active domestic institutional buyers are large, showing meaningful buyer engagement. The depth and consistency of local institutional participation point to a level of maturity that is frequently under appreciated.
How Has Asia Pacific Performed Relative to the US and Europe?
Asia Pacific returns on a local currency basis have shown resilience
Between 2017 and 2019, performance in Asia Pacific was broadly in line with the U.S. and Europe—and even slightly higher on a rolling 12-month basis when measured in local currency terms.
12-M ROLLING TOTAL RETURNS P.A. PER REGION FOR PRIVATE CORE REAL ESTATE RESILIENCE
Sources: AEW, ANREV, INREV and NCREIF, as of Q1 2025 *Please note that returns for Asia Pacific are presented in local currency
A divergence is clear from 2021 onwards - Asia Pacific had a more stable profile, highlighting the intra-regional diversification benefits (which we elaborate on later). In contrast, in the U.S., low interest rates and strong institutional demand for sectors like logistics and multifamily drove significant growth. By 2022 onwards, rising interest rates led to sharper repricing in the U.S. and Europe. While parts of Asia Pacific also underwent price adjustments, the region overall saw a more moderate response, helped by less aggressive rate hikes and continued accommodative interest rate policy in Japan. At the same time, growth in segments like South Korea office and Australian logistics helped offset declines elsewhere. Taken altogether - these dynamics highlight the collective resilience of the Asia Pacific region, where sectoral and geographic diversity help smooth through performance cycles.
Currency Has Been the Silent Drag on Real Estate Return, but Could Reverse
Most private equity funds in Asia Pacific are USD-denominated, making performance sensitive to currency moves. From 2021 through 2024, the U.S. dollar appreciated materially against many regional currencies. What this meant was even strong local-currency asset performance in markets such as Japan, South Korea, and Australia was partially or entirely offset by adverse FX translation effects. It highlights the importance of considering currency hedging strategies and that managers can’t necessarily rely on passive offset in the short to medium term. While FX effects can reverse over time, the timing is uncertain. However, it is good to note that based on currency movements for the last 20 years, the AUD, JPY and KRW are currently undervalued, creating room for near-term local currency gains that could ease the FX drag and lift USD returns.
Z SCORES OF REAL EFFECTIVE EXCHANGE RATES (REER)
Source: AEW Research, Bloomberg
Note: We leave out SGD, CNY, and HKD given their managed regimes, where policy interventions dominate price dynamics and can mask true mean-reversion signals.
Sector Evolution in Asia Pacific
An analysis of the ODCE indices show sector allocations evolve over time, adjusting to prevailing market tailwinds and headwinds. Asia Pacific remains behind the US and Europe in diversifying sector exposure – particularly in residential/accommodation, suggesting considerable scope for expansion as current tailwinds strengthen demand in this segment. Today, based on core fund exposure, the accommodation sector in Asia Pacific is just USD 3.6 billion vs USD 10.3 billion and USD 83.7 billion in Europe and the U.S. respectively.
The growth of the accommodation sector outside the Asia Pacific region has been driven by the rise of rental housing, student housing, aged care, and hotels - sectors where investor activity in Asia Pacific are still in the early stages. Other operationally intensive sectors such as data centers, healthcare and education are also gaining traction. These ‘new economy’ assets are already attracting investment through development and construction projects and, over time, will likely transition into income-producing core holdings, helping to mature and diversify the Asia Pacific region’s real estate landscape.
REGIONAL ODCE BENCHMARK SECTOR COMPARISON 2017 TO 2025
Sources: AEW, ANREV, INREV and NCREIF, as of Q1 2025
1 Open End Diversified Core Equity indices, are the most widely used real estate benchmarks that measure the performance of non-listed, open-end core real estate funds. They are produced collaboratively by NCREIF, INREV, and ANREV.
Continue reading the next piece in the series at the link below:
Part Two: Why Invest in Asia Pacific?
For more information, please contact:
HANNA SAFDAR
Head of Research and Strategy, Asia Pacific
hanna.safdar@aew.com
+65.6303.9014
JAY STRUZZIERY, CFA®
Head of Investor Relations
jay.struzziery@aew.com
+1.617.261.9326
This material is intended for information purposes only and does not constitute investment advice or a recommendation. The information and opinions contained in the material have been compiled or arrived at based upon information obtained from sources believed to be reliable, but we do not guarantee its accuracy, completeness or fairness. Opinions expressed reflect prevailing market conditions and are subject to change. Neither this material, nor any of its contents, may be used for any purpose without the consent and knowledge of AEW. There is no assurance that any prediction, projection or forecast will be realized.
