Property market splits as offices rebound, warehouse rents slide

Central and Admiralty lead rebound as Singaporean buyers dominate foreign inflows.

Hong Kong’s property recovery is becoming increasingly uneven, with core office districts tightening whilst decentralised offices and warehouse rents remain under pressure, according to Colliers Hong Kong.

Grade A office net take-up reached 864,000 square feet (sq ft) in the second quarter (Q2) of 2026, cutting overall vacancy by 1 percentage point quarter on quarter to 16.1%.

Central and Admiralty led the recovery with 182,000 sq ft of net absorption, extending their positive leasing trend to four consecutive quarters. Central business district vacancy fell to 10.2%, down from 14.5% a year earlier.

Rents in Central and Admiralty rose 1.9% quarter on quarter (QoQ) and 5.5% year to date, whilst Kowloon East rents fell 2.9% QoQ.

Colliers said demand in core districts should continue to underpin the broader office market, with increased leasing activity in Central potentially supporting sentiment in adjacent submarkets.

Around 1.2 million sq ft of new office space is scheduled for completion in the second half of the year. Colliers expects Central and Admiralty rents to rise 5% to 8% in 2026, whilst Kowloon East rents are forecast to fall by more than 5%.

Retail sales rose 10.6% year on year (YoY), whilst visitor arrivals increased 14.1% to 23 million in the first five months of 2026.

Tourist-oriented retailers, particularly souvenir and gift operators, remained active, with demand focused mainly on units of about 800 to 1,000 sq ft. High-street rents rose about 2% YoY and 0.4% year to date.

Colliers expects retail sales growth to remain positive but moderate in the second half of 2026 as some of the factors behind the recent rebound begin to normalise. The firm forecasts high-street rents to rise about 3% this year.

Warehouse rents moved in the opposite direction, falling 3.2% QoQ. Lease renewals remained the main source of activity, whilst third-party logistics and e-commerce operators supported new demand.

Colliers expects warehouse rents to fall about 5% this year. It said AI-related trade flows and Hong Kong’s target to expand gold storage capacity tenfold to more than 2,000 tonnes within three years could create demand for specialised logistics facilities and high-security vaults.

Investment volume reached about $14b in Q2, down 5.5% QoQ. Office assets remained the dominant investment sector, whilst a sizeable en-bloc residential transaction also boosted activity.

Inbound capital reached a three-year high, with Singaporean investors accounting for more than 60% of international inflows. Education-related assets also emerged as an investment theme because of their strong occupancy visibility.

Colliers said mortgagee sales, capital-loss disposals and repricing opportunities should continue to support transaction activity through the end of the year.

The firm expects education and living-sector assets to remain key investment themes in the second half of 2026 and maintains its full-year investment transaction forecast at about $42b.