The ongoing conflict in the Middle East is posing a challenge for Asia Pacific’s commercial real estate sector, as rising energy costs, inflationary pressures and uncertainty around interest rates create new risks for occupiers, developers and investors.Since the conflict began on February 28, disruption in the Strait of Hormuz, which handles over 80% of Asia Pacific’s imported oil, has driven up fuel costs and disrupted supply chains, creating challenges for the realty segment.The logistics and industrial sector is likely to be among the first parts of the property market to feel the impact, according to the assessment by Cushman & Wakefield.Rising fuel prices and selective fuel shortages are increasing the cost of moving goods both domestically and internationally. Higher diesel prices are expected to hit trucking operations particularly hard, while increased shipping insurance costs are adding pressure to maritime trade.These rising transportation costs could push up goods prices and trigger wider inflationary effects across supply chains.The construction sector is also vulnerable. As logistics and material costs rise, the region could see a greater slowdown in new project deliveries than anticipated at the start of the year, potentially tightening future supply across several property markets.
Consumer spending under pressure
Retail real estate faces pressure from changing consumer spending patterns.As households spend more on essential items and absorb higher fuel and transportation costs, discretionary expenditure is expected to come under strain. Consumers may increasingly prioritise non-discretionary purchases while reducing spending on non-essential goods.For retail landlords and occupiers, weaker discretionary spending could translate into softer demand across segments reliant on consumer confidence and non-essential purchases.
Office markets see work-from-home impact
The office sector is already experiencing some immediate effects in markets affected by fuel shortages.In parts of Southeast Asia, work-from-home arrangements have been introduced as governments respond to fuel scarcity. Higher commuting costs may also encourage employees to continue working remotely where possible, particularly in locations where public transport alternatives are limited.Over the longer term, any broader economic slowdown could affect occupier demand for office space, although such impacts are not yet evident.
Investment markets face growing uncertainty
Commercial real estate investment activity in Asia Pacific had started 2026 strongly, reaching $32 billion by the end of February, up 16% year-on-year, according to Cushman & Wakefield.However, investors are increasingly focused on the inflationary impact of the conflict and what it could mean for interest rates.Prior to the disruption, many central banks across the region were expected to continue easing monetary policy. Rising inflation risks now raise the possibility that expected rate cuts could be delayed or cancelled, while potential rate hikes cannot be ruled out if price pressures intensify.This uncertainty is likely to encourage a more cautious approach to capital deployment. Investors may re-evaluate pricing assumptions, entry and exit strategies, and asset allocations while geopolitical risks remain elevated.According to the assessment, the most significant and lasting impact on commercial real estate is likely to come through broader macroeconomic channels rather than direct disruption.Higher inflation, slower economic growth and uncertainty around interest rates are expected to shape demand, development activity and investment decisions across the region’s property markets.While the timing and scale of the effects will vary across countries and sectors, the conflict is increasingly becoming a factor influencing Asia Pacific’s commercial real estate outlook.
