Rising debt costs test Asia-Pacific investment momentum as Q3 volumes hit a new high

This quarter’s investment reaches the second-highest volume on record at US$65.6 billion, as cross-border capital accelerated across Japan, Singapore and Australia   

Singapore, 30 October 2026 – Asia-Pacific commercial real estate investment reached US$65.6 billion in Q3 2026, up 17.9% quarter-on-quarter and 7.3% year-on-year, making it the second-strongest quarter on record. 

Year-to-date investment rose 29.3% year-on-year to US$183.4 billion, reflecting sustained appetite for real estate across the region. However, rising borrowing costs are beginning to test that momentum, weighing on liquidity and returns as demand for prime assets with resilient income prospects remains intact. 

Daniel Dixon, Head of Capital Markets, Knight Frank Asia Pacific, says: “Investment volumes across Asia Pacific started the year with real conviction, as investors returned to the market and capital was deployed at a pace we hadn’t seen in some time. However, as we look to the future, we are seeing evidence that rising debt costs are putting pressure on liquidity depth, pricing and returns, leading many investors to take a more cautious, selective approach.  

“We anticipate some transactions will be delayed or repriced, as buyers and sellers recalibrate expectations. Well-capitalised investors with a long-term view will continue to find opportunities with motivated sellers where pricing adjusts quickest.”  

Gateway markets draw cross-border capital  

Cross-border investment surged 88.3% quarter-on-quarter to US$23.8 billion, accounting for 36.3% of regional volumes, its highest share since Q4 2024. The increase was concentrated in Asia-Pacific’s established gateway markets, where investors continued to target assets backed by resilient income fundamentals. 

Japan remained the region’s leading cross-border destination for the fourth consecutive quarter, attracting US$6.4 billion, up 66.3% year-on-year. Multifamily investment reached US$1.6 billion, supported by resilient rental demand and favourable yield spreads. 

Singapore ranked second, attracting US$3.4 billion, up 75.9% year-on-year. Major transactions including Paragon and Wheelock Place reflected continued appetite for scarce prime retail and commercial assets. 

Australia followed, attracting cross-border investments worth US$3.0 billion, up 20.8% year-on-year. Nearly US$1.5 billion flowed into offices, as rental growth in Sydney and Brisbane continued to support the investment case despite higher financing costs. 

Christine Li, Head of Research, Asia-Pacific, Knight Frank, adds: “Cross-border investment in the first nine months has already exceeded the full-year 2025 total. If that pace continues, 2026 could surpass the previous peak and cross the US$90 billion mark for the first time. 

“While data centres are attracting significant attention, office remains the region’s largest investment sector, accounting for more than a quarter of investment demand. In gateway markets such as Singapore and Tokyo, investors are targeting high-quality buildings where tenant demand and limited competing supply can support future rental income. The willingness to transact despite financing uncertainty points to conviction in the income prospects of the best assets.”

Well-capitalised investors are positioned to capture new opportunities  

With year-to-date investment already equivalent to 93.9% of 2025’s full-year volume, Knight Frank forecasts total Asia-Pacific investment volumes to grow by 15% to 20% year-on-year in 2026, with the next phase of the market shaped by investors with the capital and conviction to act. 

As valuations adjust, those with the capital to act and the capacity to take a longer-term view should be better positioned to capture opportunities, particularly in assets where rental growth can support returns through the cycle. 

Read the full report here

For further information, please contact:  

Michelle Bong Lejtenyi 
Communications Manager, Asia Pacific and Singapore  
Knight Frank Singapore 
michellebong.lejtenyi@sg.knightfrank.com | +65 8893 8248