Hong Kong office rents expected to drop by 5% this year

Office leasing activity is forecast to improve in H2.

According to a JLL report, rents for prime Central buildings will stabilise by the end of this year, largely driven by tenants’ heightened interest in trophy assets. Anchor tenants are capitalising on a first-mover advantage, engaging in negotiation for new projects years ahead of completion.

“Leasing activities are expected to improve in H2 2025 while vacancy pressure persists. Overall market rents will drop around 5% this year. High vacancy and falling rents are anticipated to trigger loan defaults, catalysing a cycle of distressed office dispositions,” the report said.

Here’s more from JLL:

In Q2 2025, net absorption recorded a positive 274,200 sq ft. Market sentiment improved, with increased activities and ongoing negotiations among premium buildings in prime locations, particularly Central.

Jane Street pre-committed 70% of office space (223,000 sq ft LFA) at Henderson Group’s Phase 1 of the Site 3 New Central Harbourfront project. The firm will relocate from Chater House upon the building’s completion in 2027-28.

Vacancies improve in some submarkets

China Merchants Plaza (142,700 sq ft) in Sheung Wan was completed in Q2 2025.

The overall vacancies dropped to 13.6% as at end-Q2 2025. Several markets showed improvement, Tsimshatsui and Kowloon East saw their vacancy rates improve to 7.9% and 20.7%, respectively, while Central’s vacancy rate increased from 11.5% to 11.8%.

Rental declines across all submarkets

Overall market rents declined by 1.3% q-o-q in Q2 2025, with all submarkets recording decreases. Central rents fell 0.8%, while Hong Kong East saw the largest decline (-3.7%).

With banks tightening financing and a subdued rental outlook, capital values in the overall market dropped by 2.1% q-o-q in Q2 2025, while investment yields expanded marginally.