Fitch sees Hong Kong office vacancy rising to 19% by 2025

The vacancy rate for grade-A offices in the city is projected to climb from 17% in 2024.

Hong Kong’s commercial property sector faces continued headwinds, with office vacancies rising and retail sales remaining below pre-pandemic levels, according to a new report by Fitch Ratings.

The vacancy rate for grade-A offices in the city is projected to approximately 19% by the end of 2025 from 17% in 2024, driven largely by ongoing supply growth in areas such as Kowloon East. 

Fitch expects rental reversions to be negative in the low-teen percentage range, reflecting soft tenant demand and increased leasing competition.

On the retail front, the market shows tentative signs of stabilisation. Retail sales declined by 5.6% year-on-year between January and April 2025, an improvement over the 7% drop recorded in 2024.

Fitch maintains Stable Outlooks for several major Hong Kong-based issuers. Link REIT, Swire Properties, and Sun Hung Kai Properties (SHKP) were highlighted for their strong credit profiles, underpinned by high-quality property portfolios, conservative balance sheets, and reliable cash flows. Hysan Development also holds a Stable Outlook, supported by its holdings in Causeway Bay, which Fitch noted as a relatively resilient submarket.

However, Yuexiu REIT remains on Negative Outlook, with Fitch citing low interest coverage ratios and uncertainty around deleveraging plans. Although Yuexiu holds assets in both Hong Kong and Guangzhou, its weaker financial metrics differentiate it from stronger-performing peers.

Despite the headwinds, Fitch noted that most Hong Kong property firms have stable access to funding and benefit from the recent decline in HIBOR, which is expected to reduce interest burdens in the second half of 2025.