Real Estate Sector Quarterly Insights - APAC Q1 2026

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Beyond the bank: how private credit is reshaping real estate

Tell me more: ASIC notes that real estate lending represents roughly 40-60% of the Australian private credit market, and predicts that it will continue to remain a core asset class in private credit lending. As bank lending tightens in the commercial real estate sector, we will likely see further adoption of private credit lending as it becomes more institutionalized in Australia. This shift can be seen particularly across the office and commercial real estate areas and the residential space, as asset managers and non-bank lenders seize this opportunity to see high returns, despite the risks involved. 

The scrutiny from regulators is adding tensions to the private credit lending market, as ASIC calls on industry to lift their standards following expert observations on poor practices in the growing private credit market, highlighted in their 'Private Credit in Australia' report. 

Even though the outlook for private credit lending in the real estate sector, and broadly in Australia, is still relatively palatable, especially as regulators address wrongful practices and develop a more disciplined sector, we can’t ignore the turn of the tide in recent months. We have started to see the fallout from high yield private credit lending practices, with funds like Ares Management and Apollo Global Management strapping down their private credit funds due to nervous investor reactions to liquidity risks. The strain in the sector has caused a panicked reaction to redemption requests, with some funds using employee cash and selling assets off to meet payment deadlines. 

With these developments, lenders will need to be diligent with reviewing valuation processes and transparency practices, assessing liquidity and preparing for regulatory inquiries as the sector calls for sustained discipline. Borrowers looking to utilise private credit lending to fund their real estate developments, distressed acquisitions and tailor capital structures for their projects should ensure they probe their lenders for their valuation processes, funding sources and regulatory compliance, plan for the ‘worst-case scenario’, and devise refinancing back up plans. 

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National AI plan reinforces strong prospects for Australian data centre investment and development 

Tell me more: The Australian Government Department of Industry, Science and Resources released their National AI Plan on 2 December 2025, holding strong indication for continued strength in the Australian data centre sector. The plan includes a focus on coordinating data centre approval processes to reflect ‘broader efforts to make it easier to develop major, transformational projects’. The Department of Industry, Science and Resources made a further publication on 23 March 2026 outlining expectations of data centres and AI infrastructure developers. Across the 5 expectations, key themes emerge from national security, environmental and social sustainability, and innovation. The publication commits to prioritising proposals most closely aligned with the expectations, and we anticipate these expectations will further incentivise sustainable infrastructure from developers and investors.

Australia is forecasted to have a shortage of AI-ready data centre space over the next 2-3 years as existing infrastructure lacks the specifications for AI’s intensive processing requirements, and this shortage is expected to accelerate investment into AI-specific builds. With this expected shortage and new plan, the data centre boom is not expected to slow down any time soon.

Australia is already one of the world’s biggest destinations for data centre investment, attracting the interest of hyperscalers developing large AI models. Australia’s live data centre capacity ~1.3 GW in 2025, forecast to reach ~1.8 GW by 2028, still short of booming demand – leaving a 0.7–1.7 GW supply gap by 2028. Key challenges include securing sufficient power, water and overcoming land and grid constraints in core markets (Sydney/Melbourne), which is driving expansion into new regions and on-site renewable energy investments. Globally, JLL predicts the global data centre sector to increase by 97 GW between 2025 and 2030, effectively doubling in size over the 5-year period. APAC data centre capacity is expected to expand from 32 GW to 57 GW by 2030.

For more information, check out our Data Centres page here
 

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Regulation in motion - ACCC, FIRB and AUSTRAC

Tell me more: The ACCC’s new national mandatory merger control regime has officially commenced as of 1 January 2026. From the voluntary component of the program that commenced 1 July 2025, two test cases, both lease-related, were able to make it through the ACCC new regime on time, on budget and with approval. While the reforms are intended to expedite pro-competitive transactions, the ACCC has noted that ‘determining whether the acquisition of a retail site is anti-competitive is a complex assessment requiring detailed analysis on a case-by-case basis.

Since the regime has commenced, the Foreign Investment Review Board (FIRB) portal now takes into account the regime thresholds, requiring foreign investors to disclose whether their acquisition is going to be notified to the ACCC. The ACCC has discretion to assess all proposed foreign acquisitions, even where an investor has indicated they will not be notifying the commission due to not meeting the threshold.

Additionally, AUSTRAC’s new Anti-Money Laundering and Counter-Terrorism Funding (AML/CTF) rules came into affect on 31 March for current reporting entities, and 1 July 2026 for new sectors and entities. The rules were amended in an effort to expand regulation into new sectors recognised domestically and globally as high-risk for criminal exploitation. The key changes under the law specifically call out real estate agents and conveyancers as part of the tranche 2 entities, who need to register with AUSTRAC before 1 July 2026 in order to be compliant with the rules.

These reforms significantly increase the number of investment transactions requiring early regulatory engagement and approval. This means earlier planning, more detailed upfront disclosure, and transaction timetables that account for multiple regulators assessing deals in parallel. While deal volumes have not yet shown a clear slowdown, regulators and advisers are observing transactions taking longer to structure and progress through approvals under the new settings.
 

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Institutional capital in play: M&A and global deployment trends

Tell me more: The recovery of Australia’s real estate M&A market through 2025 has been led by large‑scale, institutionally backed transactions rather than broad‑based volume growth, reflecting a clear shift toward consolidation and capital‑intensive strategies. In Q4 2025, Australia recorded 172 M&A transactions valued at approximately US$20.3 billion, representing a year‑on‑year decline in volume of around 30% but an increase in value of more than 5%, underscoring the market’s pivot toward fewer, higher‑value deals. Real estate remained one of the stronger domestic sectors by value. Improved financing conditions supported renewed momentum in the second half of the year, highlighted by transactions such as the Brookfield and GIC consortium’s agreed acquisition of National Storage REIT (HSF Kramer is advising on this transaction), which underscores the continued appetite of global private capital and sovereign investors for defensive, platform‑based Australian assets.

Cross‑border capital has remained a key driver of activity, notwithstanding earlier expectations that geopolitical tensions would materially dampen investment. Offshore investors injected substantial capital into Australian commercial real estate in 2025, with the United States continuing to dominate inbound deployment - particularly in logistics and alternative sectors - through investors such as Blackstone, KKR, Starwood and TPG. At the same time, improving FIRB processing times have supported deal certainty, helping institutional and offshore bidders remain competitive in contested processes. 

For investors, the emerging picture is not of a slowing market, but of a more concentrated and strategically selective one. Capital is gravitating toward larger, institution‑grade platforms and sectors viewed as resilient or operationally scalable, while transactions increasingly require careful navigation of competition, foreign investment and regulatory sequencing. The prevalence of consortium structures and take‑private activity highlights both the depth of available private capital and the importance of early regulatory alignment in executing complex transactions in the current environment.
 

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Policy in play: how government settings are shaping the living Sector

Tell me more: Housing Australia opened the third round of the Housing Australia Future Fund (HAFF) in January 2026. Round 3 introduces targeted funding streams covering First Nations housing, housing diversity, state and territory partnerships and large‑scale institutional partnerships and is designed to unlock delivery of the remaining 21,350 dwellings needed to meet the Federal Government’s commitment to 55,000 social and affordable homes by mid‑2029. To date, earlier rounds have committed funding to 18,650 homes, with more than 9,500 currently under construction, demonstrating the scale of capital and delivery momentum now embedded in the living sector.

Within this policy setting, PBSA emerged as one of the strongest‑performing alternative asset classes through 2025. Government policy played a direct role in supporting this momentum, with international student allocations increasingly linked to the delivery of additional accommodation. By late 2025, the PBSA development pipeline had expanded to approximately 40,000 beds, with around 11,000 under construction, reflecting renewed investor confidence and structurally undersupplied demand.

More broadly, momentum across the living sector continues despite persistent housing supply constraints. While dwelling approvals have begun to lift, they are flowing into an already elevated construction pipeline, keeping activity levels high. Importantly, feasibility conditions have stabilised, while easing interest rates and targeted tax settings have materially improved sentiment in the BTR sector. 

That said, policy risk remains an important consideration. While current settings are broadly supportive of living‑sector investment, speculation around potential changes to property tax incentives ahead of the May Federal Budget has reintroduced uncertainty. Whether these changes materialise may have meaningful implications for investor confidence and pipeline certainty, positioning the May Budget as a critical inflection point for capital deployment across affordable housing, PBSA and BTR.
 

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APAC Regional Snapshot and key investment trends

The APAC region experienced fluctuation in transaction and investment volume across several markets. Some highlights include:

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Office leasing demand and volume expected to hold strong performance in 2026

APAC office leasing demand and volume is expected to strengthen going into 2026. Increased and stricter office attendance mandates in addition to forecasted stability for region-wide office employment (3.5%) are substantial contributors, dampening concerns of AI’s ramifications. Furthermore, region-wide supply is also expected to peak, with over 61.3 million square ft of Grade A supply scheduled for completion, three-quarter of which comprising on development in Indian GCCs and large mainland cities in China. In other markets however supply constraints will be pertinent concerns, as Japan, Singapore and Australia seeing forecasted to have smaller supply increases than in prior years. Investors can expect region-wide rents, and consequently yields, to increase with substantial rises in Australian CBDs, Japan, Singapore and India.

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Living sector strength continues, senior living remains a key theme

The APAC living sector is expected to continue building from the past 2 years of strong activity. The region has experienced throttled housing supply, larger income-house price disparity and lower vacancies for department signaling strong potential for rental growth. Sub-markets with rising net migration figures like Japan and Hong Kong are expected to contribute to a vast majority of this increase. 

Concurrently sub-markets such as Hong Kong and Korea have seen policy amendments incentivizing the institutional delivery of rental assets, particularly in the BTR and PBSA sub-sectors where demand has far outstripped supply. 

Senior living is another emerging theme in the sector, as the region’s population ages and retiree’s financial security increases. Whilst cultural norms have in the past created strong imbalances between demand and supply across each sub-market, the stigma towards such living arrangements is slowly decreasing due to a strongly urbanized ageing population. Japan and India provide strong growth opportunities, particularly in the case of the latter given its relative infancy and with the sector’s strong first-mover advantage.