Hong Kong office demand shifts to smaller units in early 2025: Colliers

Office cap rates ranged from 3.10% to 4.10%, retail from 3.25% to 5.00%, and industrial from 3.00% to 4.10%.

Hong Kong’s commercial real estate market faced increasing pressure in the first quarter of 2025, with rising vacancy rates and cautious investor sentiment weighing on both the office and industrial sectors.

According to Colliers’ latest APAC Cap Rates Report, demand for office space is shifting toward smaller units as rent levels decline.

The industrial segment also struggled during the quarter, with investor sentiment weakening due to ongoing trade uncertainties. Despite relatively low cap rates, the market showed few signs of renewed activity, reflecting broader hesitancy across capital markets.

In the retail sector, capital values remain well below previous highs. However, improved tourism and stronger consumer spending are beginning to support rental prospects.

Whilst values are still subdued, some investors are taking a fresh look at the sector in light of these demand-side improvements.

Cap rates for prime Class A assets remained steady across all sectors. Office cap rates ranged from 3.10% to 4.10%, retail from 3.25% to 5.00%, and industrial from 3.00% to 4.10%.

Hong Kong’s macroeconomic indicators were relatively stable, with an interest rate of 3.73% and an inflation rate of 1.40%.