Knight Frank: Demand and leasing momentum for Grade A office buildings strengthened, expected to see a 4-6% decline in overall office rental in Hong Kong this year.

On October 8, the Managing Director of Cushman & Wakefield Hong Kong, Leo Loong Fai, stated that due to the recovery of the Hong Kong financial industry and the active momentum of IPOs, demand and leasing momentum for Grade A offices in Hong Kong will strengthen in the first three quarters of 2025. Despite the rent environment being better than expected, there are still uncertainties, so the forecast for the overall office rental decline in 2025 has been adjusted to 4-6%. Leo Loong Fai pointed out that the net absorption and new leasing transactions of Grade A offices in Hong Kong remained active in the third quarter, with Central's office performance being the best, and the rental decline also narrowing further in the third quarter. In the next two to three years, there will be no new projects completed in the Hong Kong office market, entering a period of inventory and new supply digestion. The financial industry, as the core of the Hong Kong economy, plays a significant role in the office leasing market, and if the financial industry continues to improve, it will drive leasing demand in other industries. In terms of retail, the decline in retail sales in Hong Kong has gradually narrowed since the beginning of 2025, and the average vacancy rate of prime street shops in core areas has also slightly declined, with a moderate decline in quarterly rental rates. Leo Loong Fai expects rental levels to gradually stabilize, with an annual decline of around 1-2%. Regarding the residential market, Rosanna Tang, Executive Director and Head of Research in Hong Kong at Cushman & Wakefield, stated that in the third quarter of 2025, Hong Kong property prices remained stable while rents continued to rise. Due to developers' incentives and the expected interest rate cut by the Federal Reserve, it is anticipated that the total number of transactions in 2025 could reach 58,000 to 60,000 units, and property prices for the whole year are expected to bottom out and rise to within 2%. Furthermore, Eddie Lai, Senior Director of Valuation and Advisory Services at Cushman & Wakefield Hong Kong, stated that current buyer interest is focused on properties with lower prices, especially small to medium-sized units priced below 5 to 6 million. Eddie Lai continued to say that with cashback offers from banks and expectations of interest rate cuts, he believes that the transaction volume of such properties will continue to remain high and become a major driver of the overall recovery in the residential market.