OFFICE RENTAL HONG KONG

Q1 2025

• Flight to quality to drive demand: Leasing activity is expected to register modest growth in 2025, with flight to quality demand remaining prominent. Occupiers’ more selective approach will result in stronger demand for high-quality and ESG-compliant office buildings with a strong amenity offering.

CBRE

Q1 2025

• Office Leasing: Amid challenges, the tenant-driven market is expected to persist with a focus on renewals and cautious expansion.

• Retail Leasing: High-street rents remain resilient, with brands relocating to prime locations.

• Industrial Leasing: Recovery impeded by weakened demand, with lease renewals dominating. Warehouse rents expected to decrease moderately in 2025.

• Investment Market: With the rising demand for off-campus learning centers and student accommodation, investors are increasingly capitalising on opportunities.

Colliers

Q1 2025

• The overall office vacancy rate rises slightly to 13.2% as at end-December. Hong Kong East and Kowloon East’s vacancy rise to 12.4% and 18.6%, respectively, while vacancy in Central remains at 11.6%. Read our latest monthly market dynamics of the Hong Kong office, residential, retail and industrial property markets
  

• Residential: Mass residential capital values rebound in December. The demand for Hong Kong serviced apartments is still growing, while some of the serviced apartments in Hong Kong are planning to upgrade their property for a higher rental return.
  

• Retail: China Resources Longdation reportedly acquires five shopping arcades from Hong Kong Housing Society for HKD 1.0 billion.
  

• Industrial: The leasing market witnesses more renewals while new lettings remain constrained.

JLL

Q1 2025

Hong Kong Island

At the beginning of the year, the activity level in Hong Kong’s office market was high, despite the absence of major transactions thus far. The average rent for Grade A office on Hong Kong Island fell to HK$61.1 per sq ft in January, reflecting a MoM decrease of 0.5% and a YoY drop of 4%. In Central, the average rent stood at HK$90.0 per sq ft, down 0.6% MoM and 4.3% YoY. The office vacancy rate on Hong Kong Island remained high at 12.8%, a slight decrease of 0.8% in December 2024, with Central at 13.6%. In January, the office market was witnessing continued optimism within the finance sector, with hedge funds leading the charge. For instance, a Hong Kong-based investment management firm leased 13,553 sq ft of office space at AIA Central in Central, and a Hong Kong-based hedge fund secured 6,679 sq ft at Nine Queen’s Road Central. Although there have been no landmark transactions reported in January, we have observed an uptick in leasing inquiries and inspections. Some luxury goods companies were also active with consolidation and upgrading projects, leveraging the market downturn to negotiate favorable lease terms and upgrading their office spaces. Looking ahead, the vacancy rate for Grade A office spaces is expected to remain high due to the continued influx of new supply. Despite these challenges, there are encouraging signs of improvement in leasing activities, particularly within the finance sector. The trend toward higher-quality office spaces is likely to continue as businesses consolidate.

KOWLOON

The Kowloon office market exhibited subdued activity in January 2025, largely due to the festive season. Although new lease transactions rose by 30% MoM, this was primarily due to a low base from December. The average office size leased dropped by 3% MoM to 5,700 sq ft, as most new leases were secured by small and medium enterprise. Average rent fell by 1.7% MoM to $22.6 per sq ft/ net. Most market activity focused on lease renewals, especially in Kowloon East. Notable renewals included Chong Hing Bank, which expanded 34,326 sq ft at Enterprise Square 5 in Kowloon Bay; CTBC Bank renewing 27,475 sq ft at Manhattan Place in Kowloon Bay; Far East Façade, an international façade contractor, also renewed 20,000 sq ft at Eastcore in Kwun Tong. The lack of notable new lettings suggests that many businesses postponed relocation decisions during the festive season. Some larger deals, exceeding 10,000 sq ft, are still in negotiations, indicating a potential uptick in the new letting activity post-festival. On the other hand, some companies are opting to renew existing leases, often downsizing their spaces by 10% to 15% to align with current operational needs. This trend is particularly evident in manufacturing, trading, and sourcing sectors as businesses optimize workflows and reduce staff requirements. Overall, we expect demand in the Kowloon office market to remain weak in the near term. Nonetheless, with projections of less than 1 million sq ft of new office supply within 2025, it may lead to a faster net take-up rate, suggesting rents are unlikely to decline significantly in 2025

Knight Frank

Q1 2025

Hong Kong Office Leasing Market Faces Structural Shifts Amid Oversupply Challenges

• Hong Kong’s office leasing market is undergoing a structural shift, with hedge funds, asset management companies, and cryptocurrency firms entering the market, leasing approximately 840,000 square feet of space between 2021 to 2024, nearly offsetting the space reduction from investment banks during the same period.

• Office rents in core CBDs have declined 45% since the 2019 peak.

• Vacancy rates in Central reached nearly 13% in early 2024, driven by investment bank relocations and new completions, resulting in an estimated 876,000 square feet of vacated space in Central.

• Despite a rebound in IPO activity (HK$83.4 billion raised in 2024), only 20% of newly listed firms established physical offices in Hong Kong.

• Cryptocurrency firms are emerging as new tenants, leveraging regulatory support for VATPs and crypto ETFs, though they favor smaller, flexible spaces.

Savills