Resilience Amid Challenges: Hong Kong Commercial Real Estate Market Ends 2025 on a Stabilising Note

Hong Kong commercial real estate market demonstrated resilience and ended on a cautiously optimistic note in 2025, despite persistent supply and high vacancy rates. While structural challenges continued to weigh on rents, the market showed signs of stabilisation with office leasing rebounding in core districts, retail recovering selectively, and industrial demand remained fragile. Looking ahead to 2026, the market sentiment is expected to improve further, selective retail and office growth in prime areas, and increased investor appetite as financing costs soften, according to CBRE Hong Kong’s 2026 Market Outlook.

“2025 was a year of adjustment and resilience for Hong Kong’s commercial real estate market. Despite high vacancy in some property sectors and only limited relief from rate cuts, leasing and investment demand gradually recovered. While structural challenges remain, diversified occupier needs and easing monetary conditions set the stage for a more balanced market in 2026. We expect further growth in office leasing momentum as the vibrancy in Hong Kong’s financial markets extend into the new year, coupled with tenants opting for flight-to-quality relocations. The continuous influx of students and skilled professionals will contribute to the vitality of the living sectors,” said Marcos Chan, Executive Director, Head of Research, CBRE Hong Kong.


Review and Commentaries 

Grade A Office 

• Gross leasing volume fell 17% q-o-q from the previous quarter’s high base to 1.1 million sq. ft. in Q4 2025. This brought the full-year total to 4.3 million sq. ft., a decline of 2.0% y-o-y.
• Quarterly net absorption reached 1.5 million sq. ft., the highest since Q2 2008. All major submarkets reported positive net absorption this quarter. Citywide net absorption reached 2.1 million sq. ft. for the full year, the largest annual total since 2018. Central reported 234,800 sq. ft. of quarterly net absorption, the highest since Q2 2015, with the full-year figure reaching 496,400 sq. ft., the best since 2007. Tsim Sha Tsui reported 626,100 sq. ft. of net absorption, the most since Q2 2008, bringing the full-year figure to a record-high 844,700 sq. ft.
• Despite positive net absorption, the 2.9 million sq. ft. of new stock added in 2025 pushed up citywide vacancy by 0.4 percentage points to 17.3%, bringing the total amount of vacant space to 15.9 million sq. ft., Central’s vacancy rate declined for the fourth consecutive quarter, falling to 11.1%.
• Overall rents edged up by 0.6% q-o-q, their first growth since Q2 2019. Rents in Central and Tsim Sha Tsui increased by 3.7% q-o-q and 1.7% q-o-q, respectively. For 2025, overall rents contacted by 2.9% y-o-y, the smallest full-year decline since 2019. Central rents were largely flat for the full-year (-0.1%) while Tsim Sha Tsui saw growth of 2.9% y-o-y. Hong Kong East and Kowloon East reported the sharpest falls in rents of 10.5% and 7.9% respectively in 2025.

Ada Fung, Chief Operating Officer, Advisory Services, CBRE Hong Kong: “Hong Kong’s office market has weathered a wave of new supply over the past few years, with Grade A completions pushing vacancy to 17.3% and rents easing by 2.9% in 2025. Yet, the sector showed resilience as leasing activity stabilized mid-year, particularly driven by robust demand from non-bank financial institutions and global investment firms. Central even recorded its strongest quarterly take-up since 2015. Looking ahead, diversified occupier demand and cost-sensitive relocations are reshaping the market. Leasing momentum is expected to improve in 2026, supported by financial market vibrancy and selective acquisitions and leasing by Mainland enterprises. However, we expect vacancy will improve from 2025 and rents will decline within a 3% range for 2026, giving tenants greater leverage.”


Retail 

• Visitor arrivals grew by 14.6% y-o-y in October and November combined, bringing the y-t-d total to 45.2 million Total retail sales in November rose by 6.5% y-o-y, and up by 6.9% y-o-y in October. Total retail sales for the first eleven months edged up by 0.4% y-o-y.
• Retail leasing momentum improved for the third consecutive quarter, reaching 349,000 sq. ft. F&B continued to display the strongest demand while banks were also active leasing 48,600 sq. ft. Fashion brand, jewellery stores and pharmacies were quiet, with each category accounting for only a single-digit percentage of the quarter’s total leasing volume.
• Improved leasing momentum pulled down the vacancy rate for high street shops in the four core retail districts by 2.2 percentage points to 5.8%, the lowest since Q4 2019.
• Reduced vacancy ensured rents increased by 0.6% q-o-q, bringing full-year growth to 2.9%.

Lawrence Wan, Senior Director, Head of Retail Leasing, CBRE Hong Kong: “Hong Kong’s retail leasing market maintained active momentum in 2025, led by a rebound in tourism and vibrant F&B demand. Core high streets and major malls saw active leasing, while neighbourhood retail continued to face challenges from e-commerce and consumption downgrading. Looking ahead to 2026, leasing velocity is expected to improve further, supported by a rich lease expiry pipeline from 2023. Experience-led concepts and landlord-tenant collaboration will remain key to capturing both local and tourist spending. Low vacancy on some leading high streets will warrant another 5%-7% rental growth in 2026. Decentralized retail rents are expected to remain on the fall, by low-mid single-digit levels.”


Industrial  

• Aggregate trade increased by 18.2% y-o-y in October and November combined, bringing the y-t-d total to HK$9.8 trillion, a gain of 14.1% y-o-y. Container throughput declined by 9.5% y-o-y in October-November but airfreight volume rose by 4.6% during the same period.
• Leasing momentum improved q-o-q but remained slow overall. 1.1 million sq. ft. of new leases were recorded in Q4 2025, bringing the full-year total to 2.9 million sq. ft. This figure was 11% less than that recorded in 2024. Highlights included a third-party logistics provider leasing 275,100 sq. ft. at Goodman Interlink in Tsing Yi, and Cainiao Supply Chain taking 170,000 sq. ft. at Cainiao Smart Gateway in Chek Lap Kok. Other deals included SJ Logistics leasing the whole 123,600 sq. ft. of G2000 Warehouse Building in Fanling, moving from a tin shed facility.
• Warehouse vacancy rose by 1.3 percentage points q-o-q, reaching a record high of 13%. This brought the full-year increase to 5.5 percentage points, the sharpest rise on record.
• Higher vacancy witnessed this quarter prompted landlords to lower rents to remain competitive. This led warehouse rents to fall by 2.0% q-o-q, bringing the full-year rental decline to 8.4% the sharpest annual fall since 2001. 

Samuel Lai, Executive Director, Head of Industrial & Logistics, CBRE Hong Kong: “Hong Kong’s industrial and logistics sector demonstrated resilience in 2025, supported by healthy trade growth despite challenging market conditions. Leasing momentum was modest as operators focused on cost-saving strategies, but quality assets held firm. Looking ahead to 2026, we anticipate gradual improvement in leasing demand, driven by emerging sectors and pre-leasing for high-spec facilities that enable flight-to-quality moves, though some may remain cost-sensitive. We expect gradual improvement in leasing demand and more activity from the emerging sectors. Warehouse rents are expected to edge down within a 5% range in 2026.”


Capital Markets

• The U.S. federal funds rate was cut by 50bps in Q4 2025, leading to a 12.5bps reduction in Hong Kong Best Lending Rate to 5%-5.25%. The benchmark one-month HIBOR dropped slightly from 3.54% on September 30 to 3.08% on December 31. Despite lower rates, negative yield carry conditions continued to be witnessed across many commercial properties in Hong Kong.
• Commercial real estate Investment (deals worth over HK$77 million, excluding government land sales, equity deals and internal transactions) grew by 130% q-o-q to HK$20.3 billion in Q4 2025, the highest quarterly figure in three years. This brought full-year volume to HK$44.5 billion, a slight rise of 3% y-o-y.
• End-users continued to dominate, accounting for 79% of total investment volume in Q4 2025. Corporates from mainland China were active in acquiring office premises for expansion in Hong Kong and internationally. These included Alibaba Group and Ant Group, which purchased 13 floors of One Causeway Bay for HK$7.2 billion; and JD.com, which acquired 50% of CCB Tower in Central for HK$3.5 billion.
• Local education institutions continued to expand, illustrated by the City University of Hong Kong’s purchase of the office portion of Festival Walk in Kowloon Tong for HK$2.0 billion.
• Despite higher investment volume, the number of transactions decreased by 11% q-o-q to 31. Nearly half of these transactions involved financially stressed assets, suggesting that some owners are being compelled to sell properties at considerable discounts to meet loan obligations.

Reeves Yan, Executive Director, Head of Capital Markets, CBRE Hong Kong: “Hong Kong’s commercial real estate investment market showed cautious optimism in 2025, with activity gradually improving despite limited relief from rate cuts and a persistent funding gap. End-user acquisitions and selective portfolio sales dominated transactions, with investor focus on quality assets and value-add opportunities, particularly in hotels, education, and financial sectors. Looking ahead to 2026, further rate cuts are expected to boost demand, institutional investors will gradually return, and Mainland Chinese capital should remain active. We anticipate growing interest in accommodation assets and corporate headquarters and forecast a modest increase of 5% in investment volume for 2026."