Hong Kong Office Market Rebounds

Hong Kong Office Market Rebounds, IPO Activity Spurs Leasing Demand

By Michael Gerrity, World Property Journal on October 22, 2025 7:42 AM

Hong Kong's office sector showed signs of recovery in the third quarter of 2025, led by heightened leasing activity from IPO-driven and wealth management tenants, according to JLL's latest Preliminary Market Summary.

Total net absorption jumped 137.5% quarter-on-quarter to 646,000 square feet, reversing a subdued first half. Vacancy rates edged lower to 13.4% in September from 13.6% in June, with Central and Kowloon East seeing declines of 0.8 percentage points. Wanchai/Causeway Bay, in contrast, recorded a 2.5-point increase to 12%.

"September's prime rate cuts by major Hong Kong banks, following U.S. policy moves, helped stabilize market sentiment and signal the start of an accommodative cycle," said Cathie Chung, senior director of research at JLL. "The residential market will likely see the earliest benefits from lower financing costs, but office recovery is being driven more by leasing demand than interest rates."

Despite rising demand, office rents continued a slow descent, falling 0.8% quarter-on-quarter. Central rents dropped 0.3%, while Hong Kong East recorded the steepest decline at 3.2%. Chung noted that financial, wealth management, and professional services firms are driving premium space uptake in core areas, with IPO-related expansions adding momentum. She cautioned, however, that supply pressures remain high, and Grade A office rents could fall roughly 5% for the full year.

Retail Sector Sees Modest Gains Amid Rental Adjustments

Hong Kong's retail market posted incremental improvements as high street shop vacancy rates fell to 9.7% from 10.7% in June. The recovery, however, is largely attributed to landlords' rental adjustments and incentives rather than a broad-based improvement in fundamentals.

Rents for high street shops edged down 1.4% quarter-on-quarter, while prime shopping center rents declined 3.3% overall and 3.8% for premium locations. High street rents remain 52.6% below the second-quarter 2019 peak, creating opportunities for retailers seeking prime locations. JLL projects further declines of 5%-10% by year-end.

Industrial Market Remains Soft Despite Trade Surge

The industrial leasing market remained subdued, with overall vacancy rising slightly to 9.3% from 9.1% in the previous quarter. Prime warehouse rents fell 2.1%, mirroring declines in the second quarter.

Trade activity, however, showed resilience, with total trade up 14.2% year-on-year in July and August. Imports and exports rose 14.0% and 14.5%, respectively. Yet landlords report that much of the trade rebound appears short-term, prompting continued flexibility on storage lease terms, including rent and lease duration adjustments. JLL forecasts prime warehouse rents to decline 5%-10% in 2025.

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