Decentralised office vacancies seen to drag on Hong Kong market

CBRE projects full-year office rents will fall between 5% and 7%.

Persistently high vacancy rates in decentralised business districts are weighing heavily on Hong Kong’s Grade A office market, despite a rebound in Central, according to CBRE’s latest H1 2025 Market Review.

Kowloon East, in particular, logged a record-low net absorption of -273,100 sq. ft. in the first half of the year, its fourth consecutive quarter in negative territory.

Vacancy in the submarket reached 24.2%, more than double that of Greater Central (12.7%). Hong Kong East and parts of Wan Chai also continued to shed space as tenants downsized or consolidated.

The citywide vacancy rate stood at 17.4% at the end of Q2, down slightly from Q1 but still above December’s 16.9%. Space optimisation strategies remain widespread as companies cut costs and reassess long-term needs.

Total Grade A office leasing volume reached 1.8 million sq. ft. in H1, down 30% year-on-year. Central was the only major submarket to post stable rents in Q2, whilst others saw declines.

Citywide rents dropped 0.6% QoQ and are down 2.8% for the year to date. CBRE projects full-year office rents will fall between 5% and 7%.

Despite the pressure, Central showed resilience, with net absorption hitting 186,000 sq. ft. in H1, the strongest half-year result in a decade.

This was mainly driven by a large pre-commitment deal and improving financial market sentiment. However, it wasn’t enough to lift the overall market.

CBRE expects the CBD to remain a bright spot in the second half of 2025, supported by a healthy IPO pipeline and stable demand from end-users, but warns that broader recovery will be slow unless vacancy eases in outer districts.