Could there be the return of value-add real estate in SEA?

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Could there be the return of value-add real estate in SEA?

October 20, 2026 / By Dr. Chua Yang Liang

Post-COVID value-add capital in Asia real estate has been sitting by the side as their core and core-plus cousins busied themselves. Preqin data shows the unspent value-add funds holding roughly flat since 2021, even as core and core-plus capital more than doubled over the same period before pulling back sharply through 2024–25. The reason isn’t hard to find – post-COVID policy rates remained accommodative while economic growth strengthened which supported real estate prices and prime yields tightened; conditions that were less conducive for value-add strategies.

Figure 1: Dry powder (USD Bil) for Asia-focused real estate funds

Source: Preqin, JLL Research, 4Q2026

That may be about to change.

The latest Consensus Economics survey (September 2026) suggests that Southeast Asia’s interest rate environment is becoming less accommodative. Malaysia, Indonesia, the Philippines, Thailand and Singapore are expected to see policy rates rising further over the next year. The prolonged Middle East conflict keeps energy prices elevated and forces the region’s policymakers into a defensive, inflation-fighting stance while geopolitical risks continue to weigh on global economic outlook.

At this late stage of the cycle, value-add investing could be a compelling strategy given its ability to deliver both income and capital gains – providing shelter from downside risks. Should higher rates sustain and force the repricing that value-add strategies are built for: refinancing pressure on highly leveraged assets, sellers finally accept lower prices, and a widening gap between what mispriced asset owners will take and what conservative, core buyers are willing to pay. That gap is where value-add investors operate best. If the tightening cycle plays out as forecast, the year ahead could be when the region’s dry powder finally starts moving off the sidelines. Our analysis of dry powder against actual property deal volumes across the region’s six largest markets shows that the core and opportunistic capital has been mirroring transaction activity albeit with some delay, picking up momentum roughly a couple of years after deals start moving. Value-add capital, by contrast, has been waiting on the sidelines rather than chasing the market. We believe there is pent up demand waiting to be released.

One market bucks this trend. Vietnam’s interest rates have followed an easier path than its neighbours.

Why the difference? Vietnam’s central bank simply plays a different game to most of its ASEAN peers. Where Indonesia, the Philippines and Thailand lean on interest rates to defend their currencies and keep imported inflation in check, the State Bank of Vietnam has traditionally prioritised keeping credit cheap and flowing, to support the country’s export- and manufacturing-driven growth model. It often prefers other tools — such as direct limits on bank lending growth — over blunt rate hikes, precisely so financing costs stay low for the foreign investment and factories underpinning the economy. With Vietnam positioned as a key beneficiary of companies diversifying their supply chains away from China, that growth-first approach looks set to continue — keeping Vietnam the region’s outlier, and arguably its most accommodative story, even as its neighbours tighten.