Savills: Hong Kong Central Super Grade A Property Rents Expected to Lead Recovery in Coming Years

Stock News
09/22

Savills' September Hong Kong office leasing market report indicates that despite facing structural challenges including interest rate pressures, weak demand, and oversupply, Hong Kong's office market is gradually showing signs of demand recovery. The financial sector's recovery, active property acquisitions by end-users, and relocation demand driven by Hong Kong government policies are injecting new momentum into the market. Super Grade A properties in Central's core area are performing particularly well, with rents expected to lead the recovery in the coming years.

The report notes that small to medium-sized hedge funds and quantitative funds are actively establishing presence in Central's core locations, leasing spaces of 1,500-5,000 square feet. This has driven demand for landmark properties including International Finance Centre, AIA Central, and Chater House, with rents maintaining at HK$110-130 per square foot. Secondary Central office rents generally range from HK$40-60 per square foot, creating direct competition with high-quality Grade A properties in Causeway Bay and West Kowloon. Some financial institution tenants are already considering relocation to surrounding areas.

The 2025 financial year recorded multiple large-scale owner-occupier transactions, including Hong Kong University of Science and Technology, The Law Society of Hong Kong, and Employees Retraining Board collectively absorbing over 430,000 square feet of floor space. Long-term holding strategies help curb the market's continued decline.

The new policy allowing commercial buildings to be converted into student accommodation is expected to generate 845,000 square feet of relocation demand annually, with approximately half to be absorbed by Grade A offices within the district, becoming a new driving force for market recovery.

Hong Kong regained the top position in global IPO fundraising in the first half of this year, raising over HK$107.1 billion. This is expected to create substantial business opportunities for investment banks and professional services firms, further supporting office demand in core areas.

Tom Tong, Director of Research & Consultancy at Savills, stated that despite interest rate pressures and weak demand creating short-term challenges for the office leasing market, Hong Kong's office sector is experiencing new growth drivers. The recovery of the financial sector and strong acquisition activity by end-users are jointly driving signs of demand recovery, with Central district office rents expected to lead the upturn in the coming years.

Simon Liu, Managing Director and Head of Leasing at Savills Hong Kong, noted that if the financial industry continues to recover, Hong Kong's annual office absorption is expected to return to pre-pandemic levels of 1.3 million square feet. Combined with 400,000 square feet of demand from owner-occupiers and another 400,000 square feet from relocation demand, total annual absorption could reach 2.1 million square feet.

Vincent Yiu, Associate Senior Director of Kowloon Commercial Leasing at Savills, added that under this optimistic scenario, vacancy rates are expected to peak at 16% in 2026, then gradually decline to 6% by 2030, potentially triggering a rebound in office rents.

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