Office market faces prolonged downturn despite early stability: CBRE

CBRE noted new occupiers are entering less frequently, with most expansions led by existing tenants.

Hong Kong’s Grade A office market remains in a prolonged down-cycle, marked by elevated vacancy and slower absorption.

But according to CBRE, fundamentals are beginning to stabilise, with clearer signs of recovery expected between 2026 and 2028.

Since 2022, the sector has undergone nine key structural shifts. Occupancy levels have resumed growth after previous declines, with total Grade A stock reaching approximately 89 million sq ft as of March 2025.

Demand is increasingly driven by emerging sectors such as education, healthcare, medical services, and segments of tech and fintech, while some traditional industries have continued to scale back.

CBRE noted new occupiers are entering less frequently, with most expansions led by existing tenants. The corporate footprint is shifting: local and Mainland Chinese firms are expanding their presence, while US and EMEA multinationals are contracting.

Meanwhile, decentralisation trends have slowed, with more balanced two-way flows between core and decentralised submarkets.

Sustainability has become a priority, with the green footprint expanding through both new certified developments and retrofitted assets. Owner-occupation is also on the rise, driven by purchases from banks, regulators, and other institutions.

However, the market has experienced a supply boom since 2022, with a large number of new completions outpacing pre-letting activity. This has resulted in higher vacancy rates and a slower absorption cycle.

At the same time, the shared office sector is shrinking, as landlords offer more fitted space and demand remains soft.

Looking ahead, CBRE expects a reset in workplace strategies, with continued return-to-office (RTO) momentum, portfolio optimisation, and greater use of data and AI to inform space planning.

Market outcomes are likely to diverge by submarket as competition intensifies and vacancy pressures remain uneven. As new supply slows, the market will enter a space-digestion phase, with a greater focus on absorption.

Redevelopment pressures and regulatory compliance are expected to trigger forced relocations, driving more flight-to-quality as occupiers seek upgraded, compliant space. CBRE sees Central, led by the finance sector, as the bellwether in any recovery.

Tsim Sha Tsui West is emerging as a growth node, while decentralised submarkets are expected to see stable stock levels. In response to market dynamics, landlords are becoming more flexible.