CBRE Group Inc. released a research report providing a comprehensive review and analysis of Hong Kong's office market dynamics from 2022 to 2025, with projections extending to 2028. As economic conditions improve, office demand in Hong Kong is expected to gradually recover in the coming years. Leasing activity is projected to increase over the next three years compared to the 2022-2025 period, driven by several factors: sustained recovery and steady growth in traditional service sectors, rising numbers of mainland Chinese companies establishing operations in Hong Kong, and emerging demand from new economy industries.
Key trends observed from April 2022 to March 2025 include: - Despite cost-saving measures by corporations, certain industries expanded office space, increasing total leased area by 1.1 million square feet. Growth was partly fueled by non-traditional tenant sectors that typically show lower activity in Grade A office markets. - Many major industries remained in contraction. - While leasing rates rose, significant new supply pushed vacancy rates nearly triple pre-pandemic levels, with current vacancies exceeding 17% - a historic high. - New Grade A office supply reached 7 million square feet during the study period, 2.3 times the volume added between April 2019 and March 2022. This level of three-year rolling supply growth hasn't been seen in Hong Kong's office market for 15 years. - Slow leasing of new supply left 55% unoccupied, contributing 3.9 million square feet to vacancy. - New leasing volume rose just 3% compared to the previous study period, averaging 987,000 sq ft quarterly - 22% below peak levels recorded between April 2016 and March 2019. - Rising vacancy pressure led to prolonged rental declines, with rents dropping 17% during the study period (a slower pace than the 27% decline seen from April 2019 to March 2022).
CBRE identified several new trends in Hong Kong's Grade A office market over the past three years: - Total leased area rebounded with 1.1 million sq ft growth - Emerging sectors led by public institutions/education and non-traditional banking/financial firms accelerated - Fewer new tenant leases - Shifting corporate footprints: local firms expanded while multinationals downsized - Decentralization from Central slowed, with affected space declining for two consecutive study periods - More green offices as landlords retrofit for sustainability - Growing owner-occupier demand - Slower absorption of new supply during peak delivery periods - Co-working sector contraction
Marcos Chan, Head of Research for CBRE Hong Kong, noted the Grade A office market is entering a new adjustment phase. Education institutions and non-traditional financial firms expanded leases by over 430,000 sq ft, while retail-related and insurance sector demand recovered, signaling shifting tenant dynamics. Despite elevated vacancies from new supply, accelerating service sector growth and clear tenant demand recovery will continue driving the leasing market.
2026-2028 Outlook: CBRE remains confident in Hong Kong's economic prospects, bolstered by improved global rankings that reinforce fundamentals and attract global businesses, capital, and talent. Economic momentum will be driven by government initiatives for emerging industries alongside steady growth in traditional pillars.
Office demand is expected to gradually recover, with leasing activity surpassing 2022-2025 levels, fueled by: - Continued recovery in traditional services - Growing mainland Chinese company presence - Emerging new economy sector demand - Tenant upgrades to strategic new locations
CBRE anticipates these Grade A office market trends for 2025-2028: - Workplace strategy realignment for new norms - Varied district performance, with competition focusing on non-core Kowloon markets - Market entering absorption phase as inventory growth slows - Rising forced relocations/upgrades due to building conversions and end-user purchases - Central leasing recovery led by financial firms - West Kowloon emerging as alternative financial hub - Slower decentralization as non-core supply decreases - Flexible landlord strategies with growing green lease adoption
Rosanna Tang, Head of Research for CBRE Hong Kong, stated the Grade A market is reshaping into an absorption phase amid economic recovery. Leasing activity should rebound over three years, supported by traditional sector rebound, mainland firm expansion, and emerging industry demand. While overall vacancies remain high, district performance will vary by supply-demand dynamics. West Kowloon is expected to emerge as a strategically attractive alternative to traditional business districts.
Tang added that tenants increasingly prioritize flexibility and wellness-oriented workplaces. To address high vacancies and evolving demands, landlords are adopting more flexible strategies including move-in-ready spaces with shared amenities like cafés and wellness areas, plus green leases aligning with corporate ESG goals - particularly appealing to cost-conscious SMEs and startups. Landlords best positioned to meet these shifting demands will succeed in the market's next phase.