Hong Kong office market signals recovery sign as downtown vacancy rates slip to 2-year low

In Central – the core business district in the north shore of the island – the vacancy rate for grade A offices declined to 9.9% in February from 10.1% in January, according to property consultancy JLL, as reported by South China Morning Post.

The last time the district recorded a single-digit vacancy rate was in December 2023, when it also stood at 9.9%, based on JLL data.

Across the city, the overall prime office vacancy rate edged down to 13.4% in February from 13.5% a month earlier.

Amid the improvement, rents for grade A offices in Central rose 3.5% in the first two months of the year, JLL said.

“With the banking sector remaining the primary driver of leasing activity, and demand focused on new office buildings in core business districts, only two districts have shown early signs of improvement,” said Alex Barnes, managing director of JLL in Hong Kong, Macau and Taiwan.

“This trend is expected to persist throughout the year, while noncore districts such as Kowloon East are likely to remain under pressure,” Barnes said.

CK Asset Holdings, the property developer controlled by the family of billionaire Li Ka-shing, has also expressed optimism over leasing demand this year.

“Leasing remained under pressure last year, but recent renewals had begun to see low single-digit rental increases,” said Justin Chiu Kwok-hung, executive director at the company, at its results briefing on Thursday.

Rents and sales are forecast to spike. “We expect rental and sales prices for overall non-residential properties to continue adjusting and to keep seeking support levels,” said David Ma, CEO at Midland Holdings and Midland IC&I.

“However, rental and sales prices for core district offices may stabilize first.”

A report by consultancy Savills shows that recovery in the office market is uneven across Hong Kong. Premium Grade A buildings in Central – including Two IFC, Chater House and The Henderson – maintained occupancy rates above 88%, while older properties in the same district recorded occupancy below 75%, it said in a report cited by Real Estate Asia.

Savills said the uneven pace of recovery highlights how occupiers are increasingly favoring modern, high-specification buildings, reinforcing the flight-to-quality trend shaping Hong Kong’s office sector.