HONG KONG OFFICE MARKET SOFTENS FURTHER

The Hong Kong office market has experienced a cyclical downturn since mid-2019, facing diminishing demand primarily due to COVID-19 and subsequently slower-than-anticipated economic recoveries in both Hong Kong and China. This downturn has been exacerbated by an oversupply of space, which has driven vacancy rates from 2.5% in February 2019 to 14.5% in May 2025. With total vacant space reaching 10.5 million sq ft net, Grade A office rents have declined by 43% over the past five years, showing few signs of stabilization. The impending addition of 6.7 million sq ft net of new supply over the next four years, coupled with uncertain demand, raises questions about when the office market might recover.

REVIVING DEMAND IN THE FINANCIAL SECTOR

The financial sector has been particularly hard-hit during the recent downturn, with office rents in Central experiencing an aboveaverage decline of 46% over the past five years. The reduction in initial public offerings (IPOs) since 2020 has prompted significant downsizing and relocation among investment banks and associated professional firms, resulting in a net decrease of 870,000 sq ft of prime office space leased in Central.