Hong Kong Grade A office rents to decline by up to 5% in 2026

Rental recovery will be concentrated in prime buildings.

Prime office buildings in Hong Kong are poised to lead a nascent rental recovery, although a broader market rebound is expected to take longer to materialise, according to a new report from JLL. The consultancy projects that Central and Tsimshatsui will spearhead rental improvement, supported by limited availability in top-tier buildings and accelerating lease negotiations driven by tenant upgrades.

JLL noted that demand for high-specification developments is reinforcing a flight-to-quality trend, as occupiers take advantage of current market conditions to secure premium space. However, medium-quality and older assets—particularly in fringe submarkets—are likely to remain under pressure amid uneven sectoral demand. Overall market rents are forecast to decline moderately by 0 to 5 percent in 2026, reflecting this divergence in performance.

The market’s improving sentiment was evident in late 2025, when total net absorption surged to 1.5 million sq ft in the fourth quarter, marking the strongest quarterly performance since 2019. According to JLL, the sharp rise was largely driven by pre-committed space at the newly completed International Gateway Centre in West Kowloon. Major commitments included global banking groups UBS and Banco Santander, underscoring continued confidence from international financial institutions.

Expansion activity also contributed to momentum in established districts. AIA expanded within The Gateway Tower 5 in Tsimshatsui, leasing a full high-zone floor spanning 24,300 sq ft of gross floor area. Meanwhile, Migao Group Holdings leased 10,201 sq ft at Cheung Kong Center II in Central for expansion, relocating from COFCO Tower in Causeway Bay. JLL said such upgrade and relocation moves highlight occupiers’ preference for higher-quality premises in prime locations.

Despite strong absorption, vacancy levels rose as significant new supply entered the market. Completions at International Gateway Centre, Cyberport 5 and the Tseung Kwan O Government offices added a combined 2,659,300 sq ft of net floor area in the fourth quarter. As a result, the overall Grade A vacancy rate increased to 14.1 percent as of December, according to JLL.

Vacancy pressure was most evident in fringe submarkets, while prime districts demonstrated resilience. Central recorded flat vacancy quarter-on-quarter, and Tsimshatsui saw a 0.5 percentage point contraction, reflecting steady occupier demand for core locations.

Rental indicators have begun to stabilise. JLL reported that overall market rents rose 0.7 percent quarter-on-quarter in the fourth quarter of 2025. Central and Tsimshatsui outperformed with rental growth of 1.5 percent and 1.2 percent respectively, while Kowloon East saw rents decline by 1.2 percent, underscoring the widening performance gap between prime and non-core areas.

On the investment front, office sales transactions were largely driven by end-users, with volumes picking up as prices approached support levels after a prolonged correction. JLL noted that the decline in office capital values moderated to 0.8 percent quarter-on-quarter in the fourth quarter, compared with a sharper 2.7 percent drop in the preceding quarter.

Looking ahead, JLL expects rental recovery to remain concentrated in prime buildings, particularly in Central and Tsimshatsui, where limited high-quality availability and ongoing tenant upgrades are supporting negotiations. In contrast, older assets in fringe locations are likely to continue facing downward rental pressure amid ample supply and cautious occupier sentiment.

While challenges persist, JLL maintains that improving leasing momentum in premium assets signals the early stages of stabilisation for Hong Kong’s Grade A office market, with prime districts set to chart the first phase of recovery.