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Hines sale of One Museum Place was one of largest deals in China this year (Image: Hines)
Mainland China and Hong Kong saw the largest declines in commercial real estate investment among all Asia Pacific countries in the second quarter of 2025 as investors took a more cautious approach amid a renewed trade war, according to MSCI.
APAC’s largest economy saw trades of income-generating real estate fall 46 percent year-on-year to $4.5 billion in the April-June period, ranking China fourth in the region, the data provider said in its latest Asia Pacific Capital Trends report. In Hong Kong the value of assets traded fell 45 percent from a year earlier to $900 million.
The slowdown in the two markets helped drag regionwide transaction volume in the quarter down $31.8 billion, a 19 percent drop from the same period in 2024, MSCI said.
“Much of the decline in the second quarter could be attributed to two major markets, in China and Hong Kong,” said MSCI researchers. “The declines in deal volumes for both markets appeared to be tapering off by the middle of last year and reaching a stabilisation point by the end of the year. However, the onset of trade uncertainty appears to have returned investors to wait-and-see mode.”
HK Offices Sag, China Data Centres Rebound
Leading the decline in Hong Kong was the continuing slide of the Asian financial hub’s office market, with price index for properties in the city down about 55 percent from 2019, according to MSCI.
Benjamin Chow, Head of Real Estate Research, Asia, MSCI
In mainland China, the firm’s analysts see the office market bottoming out after values in the country’s tier one cities fell nearly 20 percent from their 2019 levels.
One of APAC’s largest deals in the first half was China Post Life Insurance’s acquisition of the One Museum Place office tower in downtown Shanghai from Hines and the Abu Dhabi Investment Authority, which valued the project as much as RMB 10.9 billion ($1.5 billion).
In a positive sign for China’s data centre sector, deal volumes picked up after after a prolonged lull. One such deal was GLP’s inaugural data centre fund acquiring Greater Beijing asset in April.
Prices for retail and industrial assets in Hong Kong and mainland China began to show signs of recoverin in the first half of the year, but MSCI warned that a renewed slowdown could hamper the recoveries of these sectors.
Foreign Investment Stalls
While cross-border investors ramped up their acquisitions in other parts of APAC in the first half, foreign investments into Greater China fell to a decade low, with buyers from outside the country accounting for less than 4 percent of cross-border deals in APAC during the second quarter, down from about 13 percent in 2019.
Cross-border investments into mainland China in the first half of 2025 was about one-fifth of the average level from 2021 through 2023, while Hong Kong achieved about one-third of the average volume that it had experienced in that earlier period, according to MSCI data.
“China’s status as the world’s factory will likely be challenged by the impending onset of tariffs and their impact on global supply chains, while Hong Kong looks to be dragged along by virtue of its increasing dependence on China for capital and population inflows. Until investors have greater clarity on the nature and magnitude of these shifts, it seems only natural for a degree of reticence to creep back in,” MSCI said.