Hong Kong real estate faces mixed outlook for 2025

Grade A office vacancies are expected to rise as new supply enters.

Hong Kong’s real estate market will likely have a mixed outlook for the rest of the year amidst investor caution and the potential for interest rate cuts, according to Colliers’ latest Q1 2025 Quarterly Market Report.

Grade A office vacancies are expected to rise as new supply enters the market, pushing rents further down. 

The retail sector showed signs of improvement, with smaller retail spaces and experiential service leases leading to quarter-on-quarter and year-on-year increases in high street rents.

Upcoming large-scale events are also expected to support the sector's recovery.

In the industrial segment, activity was largely driven by third-party logistics (3PL) renewals and relocations, reflecting softer logistics demand. 

The investment market began the year cautiously, with hotels making up 45% of total transaction value. Demand for education-related properties is projected to grow in the coming months.

“Hong Kong's markets have traditionally been quiet and subdued in Q1, compounded this year by investor caution of the rate cuts paused since mid-December 2024, “ said Kathy Lee, head of Research and Retail Consultancy at Colliers Hong Kong.

“Looking ahead, banks are expected to sell repossessed assets and potential Fed rate cuts in mid-year 2025 may boost investment activity,” Lee added.