On January 16, CBRE Group Inc published a review of Hong Kong's real estate market performance in 2025. Stanley Chan, Head of Research, Hong Kong at CBRE, stated that 2025 was a year of adjustment and demonstrated resilience for Hong Kong's property market. Despite persistently high vacancy rates in some sectors and limited impact from interest rate cuts, leasing and investment demand has gradually recovered. Although structural challenges remain, diverse tenant demand and a looser monetary environment have laid the groundwork for a more balanced market in 2026. The firm anticipates office leasing momentum will strengthen further, with tenants increasingly favoring "flight-to-quality" relocation strategies. Furthermore, the continuous influx of students and professionals is expected to inject new vitality into the residential market.
Hong Kong recorded total leasing volume of 1.1 million square feet in the fourth quarter of 2025, a decrease of 17% quarter-on-quarter, primarily due to a high base in the previous quarter. The full-year total leasing volume reached 4.3 million square feet, down 2% year-on-year. Net absorption in Hong Kong for Q4 2025 reached 1.5 million square feet, marking the highest quarterly level since Q2 2008. All major submarkets recorded positive net absorption this quarter. Annual net absorption for the entire territory reached 2.1 million square feet, the highest annual total since 2018. Specifically, Central achieved net absorption of 234,800 square feet this quarter, a record high since Q2 2015, with a cumulative annual total of 496,400 square feet, its best performance since 2007.
Despite strong net absorption, new supply in 2025 reached 2.9 million square feet, pushing the overall vacancy rate up by 0.4 percentage points to 17.3%, with total vacant space amounting to 15.9 million square feet. The vacancy rate in Central declined for the fourth consecutive quarter, falling to 11.1%. Overall rents increased slightly by 0.6% quarter-on-quarter, marking the first growth since Q2 2019. For the full year 2025, overall rents decreased by 2.9% year-on-year, the smallest decline since 2019.
Catherine Fung, Chief Operating Officer, Advisory & Transaction Services, Hong Kong at CBRE, commented that in recent years, the Hong Kong office market has faced pressure from new supply, with the completion of Grade A offices pushing the vacancy rate to 17.3%, and rents falling 2.9% in 2025. However, the market demonstrated resilience; leasing activity stabilized from mid-last year, driven particularly by strong demand from non-bank financial institutions and global investment companies, with Central recording its strongest quarterly net absorption since 2015. Looking ahead, diverse tenant demand and relocation strategies focused on cost control are reshaping the market landscape. Leasing momentum is expected to strengthen further in 2026, benefiting from sustained vitality in financial markets and selective acquisitions and leasing by some mainland Chinese enterprises. The firm expects the vacancy rate to improve compared to 2025, but full-year rents may decline by approximately 3%, providing tenants with greater bargaining power.
Momentum in Hong Kong's retail leasing market improved for the third consecutive quarter, with leasing transaction area reaching 349,000 square feet in Q4 2025. Demand from the F&B sector was the strongest, while the banking sector was also active, leasing 48,600 square feet. In contrast, fashion brands, jewelry stores, and pharmacies performed sluggishly, each category accounting for only a single-digit percentage of the quarter's total transaction volume. Improved leasing momentum drove the vacancy rate for street-level shops in the four core retail districts down by 2.2 percentage points to 5.8%, the lowest level since Q4 2019. The falling vacancy rate pushed rents up by 0.6% quarter-on-quarter, with a cumulative annual increase of 2.9%.
Kenny Wan, Head of Retail Leasing, Hong Kong at CBRE, pointed out that Hong Kong's retail leasing market remained active in 2025, primarily driven by tourism recovery and robust F&B demand. Leasing performance was strong for core street shops and major shopping malls, but community retail still faced challenges from e-commerce competition and consumption downgrading. Looking to 2026, leasing velocity is expected to improve further as a large number of leases signed in 2023 are due to expire. Experiential consumption concepts and deep collaboration between landlords and tenants will be key to attracting local consumers and tourists. The low vacancy rate in some core street shops is expected to drive rents up by approximately 5% to 7% in 2026; whereas retail rents in non-core areas may continue to see low to mid-single-digit percentage declines.
Leasing momentum improved quarter-on-quarter but remained generally weak overall. Hong Kong recorded new leasing transaction area of 1.1 million square feet in Q4 2025, bringing the annual total to 2.9 million square feet, an 11% decrease compared to 2024. The warehouse vacancy rate rose by 1.3 percentage points quarter-on-quarter to a record high of 13%. The cumulative annual increase was 5.5 percentage points, the largest annual rise on record. The rising vacancy rate this quarter prompted landlords to reduce rents to maintain competitiveness; warehouse rents fell 2.0% quarter-on-quarter, with the full-year decline reaching 8.4%, the largest annual drop since 2002.
Simon Lai, Head of Industrial & Logistics, Hong Kong at CBRE, stated that despite a challenging market environment, Hong Kong's industrial and logistics sector demonstrated resilience in 2025, benefiting from steady growth in foreign trade. Leasing momentum was moderate, with operators continuing to focus on cost control, but high-quality assets remained attractive. Looking to 2026, while some companies will still prioritize costs, the firm expects leasing demand to gradually improve, driven by demand from emerging industries and pre-leasing activities for high-specification warehouses led by quality upgrades, prompting some tenants to opt for premium industrial properties. Warehouse rents may decline by approximately 5% in 2026.
In the fourth quarter of 2025, commercial real estate investment in Hong Kong (transactions over HK$77 million, excluding government land sales, equity deals, and internal transfers) increased 130% quarter-on-quarter to HK$20.3 billion, hitting a nearly three-year quarterly high; the annual total reached HK$44.5 billion, a slight increase of 3% year-on-year. The market was dominated by end-user buyers, who accounted for 79% of total investment volume in Q4. Mainland Chinese companies actively acquired office properties to support their expansion in Hong Kong and internationally. Among notable deals, Alibaba Group and Ant Group purchased 13 floors in One Causeway Bay for HK$7.2 billion; while JD.com acquired a 50% interest in China Construction Bank Tower for HK$3.5 billion. Local educational institutions also continued to expand, for example, City University of Hong Kong purchased office space in Festival Walk, Kowloon Tong for HK$2 billion.
Clement Yan, Head of Capital Markets, Hong Kong at CBRE, commented that Hong Kong's commercial real estate investment market exhibited cautious optimism in 2025. Despite limited interest rate cuts and an ongoing funding gap, market activity gradually improved. Acquisitions by end-users and selective portfolio transactions dominated the market, with investors focusing on quality assets and value-add opportunities, particularly in the hotel, education, and financial sectors. Looking ahead to 2026, expectations of further rate cuts are anticipated to drive demand, institutional investors are expected to gradually return, and mainland capital is likely to remain active. Accommodation assets and corporate headquarters are predicted to be market focal points, with investment volume forecast to grow moderately by approximately 5% in 2026.
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