Inter-regional investment in Asia Pacific (APAC), defined as capital from outside APAC, gained strong momentum in the second half of 2024, as global players began channeling their dry powder into the region. The momentum continued into Q1 2025, with inter-regional investments surpassing US$6 billion, reaching a ten-quarter high, excluding entity deals. This represents a 37% jump quarter-on-quarter and a remarkable 75% increase year-on-year.
While Japan and Australia remained the top destinations for global investors, Malaysia climbed into the Top 3 in Q1 2025, recording over US$1 billion in transaction volumes. Driving Malaysia's surge were significant data center investments by tech giants like Google and Microsoft, underscoring the growing tech-driven demand for digital infrastructure across Southeast Asia.
Another intriguing trend is the resurgence of global investors’ interest in office assets, which dominated over other sectors in transaction volumes in Q1 2025. Office deals totaled nearly US$3 billion in Q1 - the highest quarterly volume recorded since Q3 2022. This growth is supported by APAC’s expansionary office market, with occupiers actively seeking high-quality, well-located office spaces. For global investors, this presents a prime opportunity to capitalize on a sector with sustained demand.
What’s also interesting is that while the US remains the largest inter-regional investor in APAC, Middle Eastern capital has also emerged as a significant force. UAE investors ranked as the second-largest contributors to APAC investments in 2024, with volumes exceeding US$2 billion – the highest level since 2015. This surge in Middle Eastern investment is partly bolstered by a "higher-for-longer" interest rate environment, which reduces competition and creates opportunities for cash-rich investors to secure assets at more favorable terms. Furthermore, Middle Eastern buyers exhibit a broader risk appetite and are more comfortable in investing in growth markets, in addition to a preference in countries where there are existing economic ties such as Korea and India.
What will be fascinating to see will be how this ongoing resurgence in investment by global players will play out in the new global tariff environment.
Footnote: All transaction volume figures are based on MSCI’s Q1 preliminary data as of April 2, 2025.
