The Evolution of Hong Kong’s Office Market

The Evolution of Hong Kong’s Office Market: From Contraction to Early Signs of Recovery

Published by Hollies | March 2026

Hong Kong’s office market is undergoing one of its most intriguing transitions in recent years. After a prolonged downturn following the pandemic and global economic uncertainty, indicators suggest that 2026 could mark the beginning of a measured but meaningful recovery, especially in core districts such as Central and Tsim Sha Tsui.

Drawing from reports by JLL, CBRE, Knight Frank, and recent data from the South China Morning Post, the picture emerging is one of selective resilience, sector-led leasing demand, and a tightening gap between premium and secondary office space.

Central’s Vacancy Rate Falls Below 10%

In a symbolic milestone, Central’s Grade A office vacancy rate dipped back into single digits (9.9%) for the first time in over two years, according to JLL (South China Morning Post, March 2026; Hong Kong Business, March 2026).
The rebound in leasing demand, led primarily by the banking and professional services sectors, has supported modest rental growth of around 1.1% month-on-month in February.

The strong take-up reflects renewed confidence in Central’s positioning as Hong Kong’s core financial hub, where blue-chip tenants continue to consolidate or upgrade to newer, higher-spec buildings. While some non-core districts, such as Kowloon East, remain under pressure, prime districts are tightening as top-quality spaces fill faster than anticipated.

Supply Moderation Ahead: Less New Space, More Stability

Forecasts from CBRE, Colliers, and JLL (SCMP, Dec 2025) suggest that the supply pipeline for new Grade A office space is moderating. Between 2026 and 2027, only about 3.0–3.5 million sq ft of new stock is expected — significantly less than the 4.5 million sq ft completed across 2024–2025.

This reduced pace of new supply could cushion rent levels and help the market stabilize following years of oversupply. Analysts point out that the flight-to-quality trend will continue, with tenants prioritizing newer developments offering sustainability credentials and flexible layouts.

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Knight Frank: Demand in Central Outpaces Supply

In its February 2026 monthly report, Knight Frank observed that premium Grade A offices in Central are approaching full occupancy levels, driven by limited availability and steady demand from financial firms. This scarcity has led to rental increases in specific premium buildings, even as secondary and older stock lag behind.

Across the harbor, however, Kowloon East remains a tenants’ market — with high vacancy levels and continued downsizing moves, particularly from corporates optimizing footprint or shifting to more efficient layouts.

Diverging Trends: Prime Strength vs. Fringe Weakness

According to Real Estate Asia’s February 2026 update, prime districts like Central and Tsim Sha Tsui are anchoring an early-stage rental recovery, while weaker sentiment persists in fringe submarkets.
JLL forecasts that overall Grade A rents may fluctuate between 0% and -5% in 2026, reflecting the uneven balance between premium and lower-grade assets.

Recent examples — such as UBS and Banco Santander pre-committing to space in the new International Gateway Centre in West Kowloon — highlight continued confidence among multinational financial tenants, even amid wider caution.

Leasing Momentum and Tenant Behavior

CBRE’s 2026 outlook points to a 10% projected rise in new leasing activity year on year. Demand is led by:

• Financial institutions expanding footprint
• Wealth management and asset servicing firms
• Professional services seeking flexible, collaborative office environments

Meanwhile, collaborative workspace operators and technology firms remain selective, often capitalizing on sublease opportunities from larger corporates.

Knight Frank adds that larger leases (>10,000 sq ft) have become more common, reflecting a shift away from short-term renewals toward strategic relocations and consolidations.

Rent Dynamics and Market Sentiment

While overall rent declines of up to 5% in 2026 are possible (JLL, Real Estate Asia), the broader sentiment has turned cautiously optimistic. In the fourth quarter of 2025, net absorption across the market surged to 1.5 million sq ft, the strongest quarterly gain since 2019.

Importantly, capital value declines have also moderated, suggesting a potential turning point for investors assessing the commercial property cycle.

Outlook: A Gradual, Two-Speed Recovery

The bifurcation between prime and secondary assets is likely to remain a defining feature of Hong Kong’s office market in 2026. While Central and Tsim Sha Tsui are poised to lead the recovery — both benefiting from tight supply and strong corporate fundamentals — Kowloon East and fringe locations will likely continue facing downward pressure.

However, across the board, tenant confidence is returning, and landlords are becoming more flexible with terms, incentives, and sustainability upgrades, aligning with the city’s broader commitment to remain a leading regional headquarters hub in Asia.

Key Takeaways

• Central Grade A vacancy fell below 10%, marking its strongest recovery point since 2023.
• Prime leasing demand is led by financial and professional services sectors.
• Overall supply in 2026–2027 will be lower, contributing to market rebalancing.
• Rental declines of up to 5% may occur citywide, but prime rents are stabilizing or rising modestly.
• Investors and occupiers remain focused on high-performance, ESG-compliant buildings.

Hollies Insight

At Hollies, we help businesses secure Grade A offices and retail spaces that align with their operational and branding goals.

Our portfolio includes modern offices in Central, Wan Chai, and Kowloon, offering customizable layouts, prime visibility, and flexible lease options.

If your business is preparing to upgrade, expand, or relocate, our expert advisory team can help you evaluate emerging opportunities in Hong Kong’s evolving commercial landscape.

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📚 Sources

Knight Frank Hong Kong Monthly Report – Feb 2026
South China Morning Post (Dec 2025)
South China Morning Post (Mar 2026)
Hong Kong Business (Mar 2026)
Real Estate Asia (Feb 2026)
CBRE Hong Kong Commercial Real Estate Outlook 2026
Retail News Asia (2026)

Photo by kimi lee on Unsplash