According to the latest data from Jones Lang LaSalle, total investment in Asia-Pacific commercial real estate reached $47 billion in the first quarter of 2026, a 31% increase year-on-year, setting a new record for the region's first-quarter investment. Large-scale cross-border transactions in the Asia-Pacific region continued to show strong performance, with cross-border capital flows within the region surging 87% year-on-year to $16.3 billion, reaching an all-time high for a single quarter.
In Hong Kong, commercial real estate investment in the first quarter rose 41% year-on-year to $1.6 billion, primarily benefiting from improved financing conditions and renewed capital interest in prime office and retail spaces. As the 1-month Hong Kong Interbank Offered Rate (HIBOR) declined from 3.1% at the end of December last year to 2.2% by the end of March this year, lower borrowing costs alleviated funding pressure on developers, enhanced their capital deployment flexibility, and stimulated investment activity.
In the office investment market, liquidity improved in the first quarter as asset prices in core areas approached a near-term bottom. Notable transactions during the quarter included Dah Sing Financial Group's acquisition of office space in Wai Wah Hui for $107 million and Golden Diligent Ltd's purchase of units in Lippo Centre for $32 million. The retail market was also active, largely driven by mainland Chinese catering brands purchasing properties for self-use. Although distressed retail assets continued to trade in the market, the extent of price discounts has narrowed, with initial yields decreasing from approximately 9.4% in the fourth quarter of last year to about 6.4% in the first quarter of this year.
Furthermore, as the Hong Kong government continues to promote the city as a regional education hub, numerous educational institutions have been actively purchasing office and retail spaces. This trend is also prompting investors to focus on residential properties, hotels, and commercial assets with the potential for conversion into Purpose-Built Student Accommodation (PBSA). These asset types exhibit relatively resilient demand and offer attractive return prospects.
According to Chan Kwok Cheung, Head of Hong Kong Capital Markets at Jones Lang LaSalle, ongoing geopolitical uncertainties in the Middle East have triggered inflationary pressures on supply chains, adding uncertainty to interest rate trends and making investors more cautious. Consequently, even as signs of recovery emerge in the commercial real estate market, the rebound is expected to remain concentrated in specific sectors. With overall leasing demand still relatively weak, capital is likely to continue favoring high-quality assets.
He also noted that Asia is increasingly viewed as a relatively stable and defensive investment market. It is anticipated that institutional investors from the Middle East will reallocate their asset portfolios, increasing their investment exposure to the Asian region. Leveraging its inherent advantages, Hong Kong is well-positioned to be a primary beneficiary of this capital inflow.
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