By Clare Jim
HONG KONG, April 2 (Reuters) – Hong Kong’s Grade-A office market in the city’s financial core is finally hitting a floor after nearly seven years of decline, buoyed by a roaring capital market that is boosting demand from both mainland Chinese and multinational firms, realtors said.
The turnaround follows a blockbuster IPO year in 2025, when funds raised in Hong Kong jumped 231% to $37 billion. With another crowded pipeline shaping up this year, the momentum is spilling beyond trading floors and into prime office towers.
“Companies are coming because of the capital markets, definitely,” said Sam Gourlay, JLL Hong Kong head of office leasing advisory.
Among the top names that have snapped up Hong Kong office space is Chinese e-commerce giant JD.com, which in December bought a 50% stake in a tower in the Central business district for $450 million.
In neighbouring Causeway Bay, Alibaba, with its fintech affiliate Ant Group, bought 13 floors of Mandarin Oriental’s new flagship office tower for $925 million.
The listing boom has also breathed life into Central’s leasing market. Financial institutions IMC Group and Northern Trust rented new spaces this year, following Jane Street letting six floors in a soon-to-be-completed office tower in June in one of the largest Central leasing deals in decades.
RECOVERY REMAINS UNEVEN
Still, realtors and analysts warned the recovery remains uneven, with substantial oversupply elsewhere continuing to drag on demand.
“Hong Kong commercial property is undergoing a highly specific recovery,” S&P said in a report on Thursday. “This recovery is not broad-based; it is concentrated within select Grade-A office towers and for some landlords adept at attracting luxury retail tenants.”
Hong Kong’s overall office valuations and rents have collapsed by more than 50% since 2019, hitting cash flows at debt-laden developers, forcing some into restructurings and leaving banks nursing heavy charges on soured commercial property loans.
Since the second half of 2025, transacted prices in Central’s Grade A offices rose around 5%, realtors said.
Rents rose 3.5% in the first two months of 2026, with the vacancy rate improving for the third consecutive month in February to 9.9%, according to data by JLL. That compared to the city’s overall rate of 13.4%, and Kowloon East district’s 19.5%.
CHINESE FIRMS EYE PRIME OFFICE SPACE
Property agents said more Chinese companies, including tech firms, are now looking to buy office space in the financial district, aligning with the city’s push to position itself as a regional tech hub.
CBRE Hong Kong head of capital markets Reeves Yan said more local capital is increasingly moving into strata-office investments, wagering on a sector recovery, while foreign funds and corporate buyers remain largely absent.
“We have passed the peak of oversupply in Central, which was 2024-25,” said Yan, adding that new supply in the next five years will likely be half of the past five years.
“Most of the new spaces have been filled up, and now it’s become a landlord market where people are fighting for high-quality offices.”
In leasing, on the other hand, expansion was led by international financial institutions, market data showed, while Chinese securities firms accounted for more deals but at smaller sizes.
The hedge fund sector occupies less than 2% of total office space in Hong Kong yet accounted for 18% of all net demand last year, said JLL’s Gourlay.
In the first three months this year, some of the major new leases in the city also came from J.P. Morgan, law firm Ropes & Gray, as well as Chinese securities firms Futu and E Fund.
“I wouldn’t be surprised if this year certainly matches last year in numerical transactions and the strength of the hedge funds and asset managers,” Gourlay said. “We have multiple conversations at the moment. Nearly all of them in that sector are expanding – and aggressively.”
(Reporting by Clare Jim; Editing by Anne Marie Roantree and Shri Navaratnam)
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