Manufacturing and logistics demand in Vietnam and Indonesia is forecast to grow by up to 20% over the next three years, driven by tariff fluctuations under a second Trump administration, according to Knight Frank’s latest Asia-Pacific Horizon report. This growth reflects a broader realignment of global trade as companies restructure to build more resilient regional supply chains.
Knight Frank reports that the current wave of tariffs under the second Trump administration has both intensified and broadened in scope. Now affecting 57 countries, the latest measures extend beyond the initial focus on mainland China and Europe during his first term. It also covers a wider range of goods, impacting some US$2.3 trillion ($2.98 trillion) in imports.
Additionally, the US-China trade war has intensified, with the US’s effective tariff rate on Chinese goods spiking to 124.1% from 19.3% under Trump’s first administration. Effective tariff rates for the rest of the world have increased to 10.3% from 3.1% previously.
While Trump has temporarily halted the tariffs, including a 90-day agreement with China that has reduced tariffs on Chinese goods to 30%, Knight Frank believes that MNCs, particularly those from China, Japan, and South Korea, will look to further expand their supply chains under the “China+N” model.
The model builds on the “China+1” strategy that first gained traction during Trump’s first administration. Under this strategy, MNCs sought to diversify their supply chains beyond China, with Southeast Asian countries such as Vietnam emerging as top beneficiaries. Knight Frank reports that demand for logistics space in Southeast Asia has soared, with rents increasing by an average of 17.2% from 2020 to 2024.
Under the “China+N” model, MNCs are seeking to gain further agility through multi-country sourcing and flexible production networks. The strategy has evolved beyond just a response to tariffs, says Tim Armstrong, Knight Frank’s global head of occupier strategy and solutions.
Instead, it has “become a standard operating model”, driven by operational durability and total cost performance. “This isn’t a cyclical adjustment, it’s a structural transformation that requires entirely new approaches to portfolio planning, lease structures and location strategy,” adds Armstrong.
Chistine Li, Knight Frank’s Asia-Pacific head of research, highlights that supply chain investment decisions are also accelerating towards an “Asia for Asia” model, where 65% of decisions are driven by intra-Asian consumption.
This shift, in tandem with US tariffs, is expected to have a mixed impact on Apac countries. Winners include Indonesia, where Knight Frank is projecting a 15% to 20% growth in manufacturing-related real estate demand, driven by the electronics, automotive, and logistics sectors seeking purpose-built facilities.
A similar 15% to 20% rise in manufacturing space demand is also expected in Vietnam. However, while it remains a key beneficiary of the “China+N” strategy, Knight Frank’s report highlights that the country stands among the most exposed to reciprocal US tariffs. Before the 90-day pause, Vietnam had been subject to a 46% tariff rate, one of the highest in Southeast Asia.
The report maintains a positive outlook for India, underpinned by a strong office market. India accounted for 47% of all office leasing activity in Asia Pacific in 2024, up from 36% in 2015. Indian office leasing volume also reached a record 6.68 million sq m, driven by IT and multinational corporations, as well as global capability centres seeking skilled talent and cost-effective operations.
On the other hand, trade-reliant economies and regional service and gateway hubs, such as Singapore, Hong Kong and Malaysia, are expected to face second-order risks from US tariffs. These include global supply chain disruptions and spillover effects from economies directly impacted by the tariffs.
Knight Frank’s Global Corporate Real Estate (CRE) Sentiment Index shows that while confidence among CRE leaders dipped after the tariff announcement in early April, longer-term strategic indicators, including capital expenditure and physical expansion plans, have remained resilient despite ongoing global uncertainty.
As global trade dynamics continue to shift, driven by rising tariffs, deepening US-China decoupling and accelerated supply chain diversification, Knight Frank expects commercial real estate leaders to respond with strategic agility. This may drive greater adoption of flexible lease structures, an increased focus on cost-efficient and demand-resilient markets, and stronger demand for adaptable, plug-and-play logistics parks.
Despite the temporary easing of tariffs, the current trade environment has highlighted the need for agility in portfolio management and lease structure, says Armstrong. He adds: “Companies that calibrate their real estate approach will be better positioned for success regardless of how the US-China negotiations unfold.”
