Hong Kong property values, rents fall across sectors in Q1: JLL

Despite this, leasing activity in the office, retail, and residential sectors held firm.

Hong Kong’s real estate market remained under pressure in the first quarter of 2025, as rents and capital values declined across most segments amid soft demand and elevated supply.

Despite this, leasing activity in the office, retail, and residential sectors held firm, according to JLL’s latest Preliminary Market Summary.

Market sentiment remains cautious as investors adopt a wait-and-see approach, driven by uncertainty over US-China trade tensions and interest rate movements.

Analysts noted that whilst broader macroeconomic impacts are still unfolding, early signs suggest increased stress in certain commercial sectors.

The office sector posted a negative net absorption of 143,400 square feet in Q1, largely due to previously vacated spaces returning to the market.

Overall office vacancy rose to 13.7%, with vacancy in Kowloon East increasing to 21.3% from 18.6%, the steepest amongst districts. In contrast, core districts such as Central and Tsimshatsui saw modest improvements in occupancy.

Grade A office rents declined by 1.3% QoQ, with Hong Kong East recording the largest drop at 3.4%. JLL expects office rents to fall by 5–10% for the full year, citing continued supply pressures.

Retail leasing remained active, particularly amongst mass-market retailers, fitness operators, and securities firms. Still, landlords offered discounts to attract and retain tenants, leading to rental declines across the board.

High street shop rents fell by 0.8%, whilst prime and premium prime shopping centre rents eased by 0.3% and 0.2%, respectively. Vacancy rates inched up slightly, with high street shops at 10.6% and prime centres at 9.2%.

Outlook for the sector remains muted, with rents for both high street and prime retail expected to decline by up to 5% over the year.

The residential market showed a mixed picture. Whilst mass market home prices dipped by 0.1%, luxury rents rose by 0.8% in the quarter, buoyed by stable leasing demand and continued inflows of foreign professionals.

A total of 14,200 talents and 9,300 dependents entered Hong Kong through government talent schemes in the first two months of the year.

Sales volume dropped 19.2% QoQ but remained 24.1% higher than the same period last year. Policy tweaks, including raising the stamp duty exemption threshold from $3m to $4m, are expected to boost activity in the entry-level market.

In the industrial segment, the prime warehouse vacancy rate rose to 8.9%, the highest in years. Capital values and rents for warehouses both fell 0.9% in Q1.

The sector is being challenged by structural shifts in global trade, with import-export activity weakening due to ongoing US-China tensions and a softening economy.

With over 60 million square feet of prime warehouse stock in Hong Kong, more than 5 million square feet now sits vacant. JLL warns that the transformation of Hong Kong’s logistics and industrial base will take time and face significant headwinds.