What drove Hong Kong’s 10% office rental growth over the past 12 months?

Hong Kong office occupiers are upgrading amidst favourable leasing conditions.

Demand for premium office space continued to underpin Hong Kong's leasing market, with financial services firms and large institutional occupiers driving a sustained flight-to-quality trend, according to Knight Frank.

On Hong Kong Island, Knight Frank said Premium Grade-A offices in Central have attracted robust demand, helping support rental growth of around 10% over the past 12 months. Near-zero vacancy in the premium segment has also boosted leasing activity in traditional Grade-A buildings in Central, while newer high-specification projects in West Kowloon and Quarry Bay have seen increased tenant interest.

The consultancy noted that multinational occupiers are increasingly right-sizing while upgrading to higher-quality premises and positioning themselves for future expansion. This has led to rising landlord expectations and rental levels across key office districts.

In Kowloon, leasing activity in April was driven largely by renewals and lease restructurings rather than relocations, particularly among tenants in the IT and electronics sectors. Knight Frank said many occupiers moved early to secure leases at current rental levels as the market enters what appears to be a bottoming-out phase.

Renewal discounts narrowed across Kowloon, signalling improving sentiment. “Renewal discounts narrowed to 0% to-2% in Kowloon Central, 3% to -6% in Kowloon West and -4% to -7% in Kowloon East, indicating improving market sentiment,” Knight Frank said.

With a smaller pipeline of new office supply expected in 2026 and positive net absorption emerging, Knight Frank expects rental declines to moderate as the market approaches a soft landing.