Tokyo continues to attract real estate investors from around the globe (Getty Images)
For a third year running, Tokyo is Asia Pacific’s most desirable destination for property investment, according to a survey by the Urban Land Institute and PwC.
Singapore, Sydney, Osaka and Seoul rounded out the top five in the Emerging Trends in Real Estate Asia Pacific 2026 report, as respondents expressed a preference for cities with stable economies, low vacancy in key sectors and market liquidity.
The survey of more than 380 property investors and managers showed an uptick in optimism overall but with wide variances across the region, said ULI Asia Pacific CEO Alan Beebe. Notably, respondents remained reluctant to invest in China, with mainland cities and Hong Kong standing out as the only APAC markets with substantial distress.
“Sentiment is improving but is somewhat fragile,” Beebe said. “Developed markets are very much in favour, however there is a strong cohort of investors who believe in the Indian market, due to its size and scale.”
Jumping Into Japan
Respondents reeled off a list of positives attracting them to Japan real estate, including high liquidity, political stability, low supply in all sectors (except logistics), a large multi-family market, low interest rates and booming tourism, as well as opportunities to buy assets from domestic firms under pressure to freshen up their balance sheets.
ULI chief executive Alan Beebe
“Japan offers attractive opportunities due to its gradual interest rate approach, cheap debt environment, and growth in sectors like multi-family and hotels, which have strong local demand dynamics,” one Sydney-based executive told ULI.
The report noted a sharp polarisation between the highly favoured developed markets and mainland China, where a “deadly combination” of political concerns and legacy asset underperformance has repelled foreign capital.
ULI cited MSCI data showing that foreign investors spent $140 billion on Chinese real estate between 2005 and 2024, with many of those investments incurring losses. MSCI found that China office prices have fallen nearly 20 percent since 2019 and retail prices are down more than 35 percent, while logistics pricing — while up since 2019 — is down 36 percent from its 2022 peak.
Another concern is that China will follow Japan into a long period of deflation, driven by a population projected to decline by half to 630 million by 2100.
Still, as one Hong Kong investment manager pointed out: “The macro picture isn’t everything, because look how well real estate in Japan has performed despite the weak macro and demographic outlook. China is still going to be the largest economy in Asia.”
Digital Darlings
The data centre sector is expected to outperform in 2026, while survey respondents also expressed confidence in logistics, self-storage and living sectors like multi-family and student housing.
“Data centres remain the darlings of the investment world, though assumptions are subject to challenge by the bargaining power of tenants, power capacity constraints and technological advances,” said Stuart Porter, APAC real estate leader at PwC. “AI is in the early stages of transforming middle and back-office roles and operations while elevating the value of operational expertise. Use of AI might temper the office recovery, even as ‘work from home’ largely dissipates.”
Expectations for the office and retail sectors remain subdued, according to the report, though low vacancy is expected to drive strong performance in Tokyo and Singapore offices.
The single most significant challenge cited by respondents was construction costs, which are seen constraining new development, while sustainability measures are increasingly expected to show a return on investment.
