Home and office leasing signal recovery as retail stays weak

Grade A office space leasing rises to highest since the pandemic on expansions and relocations.

New home sales and expansion activities lifted up Hong Kong's residential transactions and office leasing markets, but rental pressure form retail remains, according to Cushman & Wakefield.

Improved rental yields encouraged investors to re-enter the housing market, supporting monthly transaction volumes that exceeded 5,000 cases in Q2 2025, C&W said in a report published on 3 July 2025.

A total of 1.2 million square feet (sqft) of Grade A office spaces were leased in Q2, the highest level since the pandemic thanks to expansion and relocation activities from the banking, finance and insurance sectors.

However, the overall Grade A office rental level continued to decline 1% quarter-on-quarter (QoQ), an overall drop of 3.4% comparing with H1 2025.

“New supply pipeline and high availability may continue to weigh on rental performance in H2 2025. [We] forecast the overall office rental to decline by 7%–9% throughout the year," said John Siu, Managing Director at Cushman & Wakefield Hong Kong.

The retail leasing market also continued to decline despite growing visitors.

Total retail sales drop 4% YoY to $155.1b in the first five months of 2025.

High-end retail categories have been most affected as visitors spending become more cautious, C&W said. As a result, high-street retail rents generally fell in Q2, with Causeway Bay fell 3.6% QoQ, followed by Tsimshatsui and Mongkok’s decline of 3.4% and 1.7% QoQ respectively.

The market is under pressure but remained resilient, Siu said.

"[We] expect high street retail rents and Food & Beverage rents largely stable with mild decrease between 1% to 3% in the second half of the year,” said Siu.

The total residential transaction number for the Q2 is expected to rise by 30% QoQ to 15,900 units due to weakening HIBOR and rapid launch of new projects.

“Despite global and HIBOR uncertainties, potential interest rate cut by the U.S. later this year could further support lower HIBOR levels,” said Rosanna Tang, Executive Director and Head of Research at Cushman & Wakefield Hong Kong.

“We maintain our forecast that overall transaction volume remains similar with last year while home price fluctuations within a ±3% range in 2025,” she added.