Real estate investment market rebounds in Q2

Office and industrial sectors remain under supply pressure.

Hong Kong's investment market showed signs of recovery, with a 33% quarter-on-quarter increase to $8.3b in investment value, according to Colliers' 2025 Q2 report.

This is mainly attributed to office assets transactions which accounted for 89% of the total value, with retail leasing in core areas remaining active. However, office and industrial sectors remain challenged by the imbalance between supply-demand.

The Grade A office market reversed the negative absorption in Q1 to a positive 300,000 sq. ft. in Q2. Central/Admiralty led the recovery with 75,000 sq. ft. absorption, reflecting a short-term rebound.

The overall vacancy rate remained high at 17.3% and might increase as 3 million sq. ft. will supply in the rest of the year and another 2 million sq. ft. in 2026.

Rents continued declining 1.8% QoQ and 4.7% year-to-date (YTD), with Island East experiencing the steepest drop at 4.1% QoQ.

“We expect vacancy rates to ascend to approximately 19% by the end of 2025,” said Fiona Ngan, Head of Occupier Services at Colliers Hong Kong, “the market is facing a significant supply-demand imbalance.”

High-street rents in the retail market rose by 1.5% year-on-year (YoY) thanks to expansions and relocations from local, mainland, and international brands.

Despite a 5.6% YoY decline in retail sales during the first four months of 2025, retail leasing remained robust, said the report.

The industrial sector rents continue falling 1.1% QoQ and 5.0% YoY, as warehouse demand remained subdued amid geopolitical uncertainty. “We expect industrial rents to decline by a total of 5% by year-end,” said Ngan.