Property market gains stability in Q1 as costs ease, leasing picks up

But geopolitical tensions and conflicts in the Middle East continued to weigh on sentiment.

Hong Kong’s property market showed stabilisation in the first quarter of 2026, with improved sentiment in selected sectors supported by lower borrowing costs and a modest recovery in investment activity, according to market reports from CBRE Hong Kong and Colliers.

CBRE Hong Kong said the market demonstrated resilience in the first quarter (Q1) of 2026, with improving financial market conditions and increased professional investor participation contributing to a more constructive outlook.

Colliers said improving trade conditions and easing borrowing costs helped temper downside risks, although geopolitical tensions and conflicts in the Middle East continued to weigh on sentiment.

In the Grade A office market, CBRE reported net absorption of 375,400 square feet (sq ft) in Q1 2026, marking the fourth consecutive quarter of positive absorption and bringing total net absorption over the past four quarters to 2.7 million sq ft.

Vacancy fell to 16.8%, whilst overall rents rose 1.6% quarter on quarter (QoQ), driven by Central and Greater Central. Central recorded 214,100 sq ft of net absorption, its fifth consecutive positive quarter, whilst Kowloon East recorded negative absorption.

Colliers said Grade A office leasing momentum also remained positive, supported by continued demand for prime CBD assets, noting that decentralised submarkets continued to face pressure, with market performance increasingly split between core and non-core locations.

In retail, CBRE said visitor arrivals rose 18.4% year on year (YoY) in January and February, whilst retail sales grew 5.5% YoY in January.

Leasing volume reached 214,000 sq ft in Q1 2026, whilst high street rents rose 0.9% QoQ for the fifteenth consecutive increase. Vacancy rose to 6.8%, although it remained historically low.

Colliers reported retail sales growth of 11.8% YoY in the first two months of 2026 and said leasing demand remained concentrated in mid-sized units. It reported a 1.6% YoY increase in high street rents and said tourism and retail spending supported market fundamentals.

In the industrial and logistics sector, CBRE said warehouse vacancy fell to 12.8% following positive net absorption of 135,800 sq ft in Q1 2026, whilst leasing volume increased 17.4% year on year to 682,800 sq ft. Warehouse rents declined 1.2% QoQ, marking the ninth consecutive quarterly drop.

Colliers reported a 2.3% QoQ decline in warehouse rents and a 9.1% YoY fall, citing ongoing supply-side pressure and softer external demand conditions. Both firms said improved occupancy reflected landlord flexibility in pricing, although logistics operators remained cautious.

In capital markets, CBRE said investment volume rose 105% YoY to $12.3b in Q1 2026, despite a 43% QoQ decline.

Office assets accounted for 53% of total investment activity with major transactions including the University of Hong Kong’s acquisition of a building in Sheung Wan and Dah Sing Bank’s purchase of office floors in Wong Chuk Hang, whilst hotel investment activity increased due to interest in student accommodation conversions.

Colliers reported investment volume of $14.7b, up 4.9% QoQ and 134% YoY, with office and accommodation assets amongst the key drivers. Both firms said professional investors and end-users were active in the market, with growing interest in education-related assets and alternative uses such as student accommodation.