ASIA-PACIFIC: Asia-Pacific’s office sector is positioned for a significant surge in value-added investment opportunities, according to Knight Frank’s latest outlook report featured in a Real Estate Asia article. With a sharp focus on the redevelopment and renovation of older office buildings, investors are eyeing the potential to transform and upgrade assets to meet the rising demand for modern, sustainable spaces.
A two-tiered market emerges
The Asia-Pacific office market is transforming, driven by the growing gap between premium office spaces and outdated stock. According to Christine Li, head of research at Knight Frank, this split is creating substantial opportunities for investors seeking to rejuvenate Grade B and lower-tier buildings.
As corporate occupiers increasingly favour high-quality spaces—partly due to the ‘flight-to-quality’ trend—there is a rising demand for office buildings that not only offer better specifications but also align with sustainability and wellness criteria. These buildings are prime candidates for value-added investment, where incorporating Environment, Social, and Governance (ESG) features can provide significant returns.
“Asia-Pacific is evolving into a two-tiered market, which is reshaping investment strategies,” said Li. “With the growing emphasis on ESG compliance, there’s a sustained demand for office spaces that meet these new standards, making them attractive targets for redevelopment.”
Office investments rise despite challenges
The office sector continues to lead Asia-Pacific’s real estate investment, posting a 16% increase in investment volume year-on-year. The sector reached US$59.5 billion in 2024, up from US$51.2 billion in 2023, accounting for 37% of total capital inflows in the region’s real estate market.
Asia-Pacific’s office market remains a strong performer compared to its Western counterparts, benefiting from higher occupancy rates. In contrast to the 65% occupancy rate in major US cities and 70% in Europe, Asia-Pacific boasts an impressive 80% average.
This high demand for office assets reflects not just the resilience of the market but also the ongoing appeal of premium, ESG-compliant properties, making them a solid investment choice for the year ahead.
Data centres and industrial assets garner investor attention
While the office sector remains dominant, alternative real estate sectors, such as data centres and industrial assets, are also drawing significant investor interest. Data centres, in particular, saw explosive growth, with investments reaching US$6.3 billion in 2024—more than double the previous year’s US$2.5 billion. As digital demand continues to surge, Asia-Pacific’s data centre market is set for sustained growth, driven by a supply-demand imbalance and strong regional digital infrastructure needs.
Fred Fitzalan Howard, Knight Frank’s data centre lead, noted that “Asia-Pacific offers significant investment opportunities in the data centre sector”, with Malaysia emerging as a regional hub. As tech giants and AI companies diversify their operations away from traditional data centre hubs, emerging markets such as Chennai, Melbourne, and Bangkok are also gaining traction.
Meanwhile, the industrial sector in emerging markets has experienced notable growth, particularly in Vietnam, which has become an investment hotspot. Vietnam’s strategic location and robust export growth have attracted increased foreign direct investment, propelling the country’s industrial sector to a record-breaking US$3 billion in investments in 2024—an impressive 50% increase from the previous year.
The Asia-Pacific real estate landscape in 2025 presents investors with a diverse array of opportunities. From revitalising office spaces to capitalising on the burgeoning data centre and industrial markets, the region offers promising prospects across various asset classes.