• APAC leasing momentum remained resilient in Q2 2026 though showed mixed results across markets, underpinned by persistent demand for high-quality, well-located space as workplace quality considerations and strategic upgrades shaped tenant decisions.

• Regional supply totalled 1.2 million s.m., slightly moderating from prior quarter levels. Vacancy rates edged down despite fresh completions, reflecting healthy underlying market fundamentals and sustained absorption in premium segments.

• Office investment volumes reached USD 17.2 billion—up 29% year-on-year—as institutional capital targeted high-quality assets, keeping office the region’s most active real estate sector by volume.

Leasing conditions varied across the region in Q2, with activity concentrated in prime, well-located assets while several markets experienced softness. Financial services, technology, and professional services firms anchored demand, with emerging interest from AI and AI-related companies also observed. Hong Kong recorded strong absorption as financial sector activity tightened Central’s vacancy and drove rental increases, pushing spillover demand into Wan Chai and Causeway Bay. India saw volumes moderate slightly, though activity remained at strong levels through the first half. Mainland China showed uneven recovery—cost discipline shaped tenant decisions, with conditions largely tenant-favorable and concessions still common, though some landlords with high occupancy began firming on pricing as declines moderated. Tokyo’s persistently tight conditions continued to weigh on leasing momentum while fueling rental growth, and Sydney-led expansion activity in Australia reinforced the broader flight to quality.

Investment activity stayed anchored in prime, well-located assets as capital prioritized quality over scale. In Japan, core investors returned to Grade A towers, with MetLife’s Osaka acquisition and Nomura’s D Tower purchase from BGO reflecting strong appetite. Singapore saw notable activity as CICT divested Asia Square Tower 2 to IOI Marina View for SGD 2.5 billion, enabling strategic portfolio optimization. South Korea witnessed institutional capital deployment through National Pension Service-backed managers targeting Seoul’s premium inventory.

Outlook
Underlying leasing activity is expected to remain steady through the remainder of 2026, with occupier demand continuing to concentrate in premium buildings within established business districts driven by quality upgrades and strategic relocations. Rental growth should remain focused on core locations where constrained availability supports pricing power, even as new completions expand options in select markets. Looking further ahead, while most business and CRE leaders recognize AI will significantly impact portfolio strategies over the next 3-5 years, few have moved beyond initial exploration (JLL’s Future of Work Survey), and its ultimate effect on office markets will be shaped by multiple factors including AI labor availability, supply dynamics, and broader economic conditions (Where AI is changing jobs and what it means for real estate).