CBRE: The Hong Kong commercial real estate market continued to cautiously recover in the third quarter, with net absorption of Grade A office space reaching the highest level since the third quarter of 2018

CBRE's "Hong Kong Commercial Real Estate Market Outlook for Q3 2025" report indicates that, benefiting from slowing interest rates and a more stable macroeconomic outlook, the office, retail, industrial, and investment markets, although performing unevenly, are gradually seeing a rebound in activity across all sectors.

Chen Jinping, head of the research department at CBRE Hong Kong, stated that the Hong Kong commercial real estate market continued its cautious recovery in Q3 this year, aided by the sustained growth of several key economic indicators and improved demand from office and retail tenants. With increased demand from leasing and owner-occupiers, market transaction volumes have also risen. Despite challenges such as high vacancy rates and shifts in tenant demand, the commercial real estate landscape in Hong Kong is gradually adapting to the new normal, with owners, investors, and tenants readjusting their strategies to seize emerging opportunities. A strong pipeline of new listings and active projects is expected to further support the local economy's recovery in the remainder of this year and into next year.

Grade A office buildings continued to recover in Q3, with net absorption across Hong Kong reaching 691,800 square feet, the highest since Q3 2018. Leasing momentum has strengthened in all major areas, and for the first time since Q2 2015, all districts recorded positive absorption. Central Hong Kong led the performance with a net absorption of 138,000 square feet, setting a record for the highest quarterly figure in a decade, primarily due to tenants taking advantage of attractive rental levels to upgrade or relocate their offices. Although some tenants remain cautious due to high vacancy rates, especially in non-core areas, the market is gradually readjusting.

Wen Yunqiang, senior director and head of the retail leasing department at CBRE Hong Kong, indicated that retail leasing momentum accelerated in Q3 this year, mainly benefiting from the rebound in retail sales and a steady increase in the number of visitors to Hong Kong. Operators in the food and beverage sector remain active, with Chinese dining groups driving new leasing demand. Mid-range fashion brands also showed strong interest, reflecting an overall improvement in retailer confidence. Looking ahead, leasing demand in core areas is expected to remain strong, particularly on major first-tier streets. Attractive rental levels will continue to attract overseas and mainland Chinese brands, as well as food and beverage groups to enter Hong Kong. At the same time, experiential and health-focused concepts are gradually gaining favor in the market and expanding in various regions.

Li Shangwen, executive director and head of the industrial and logistics department at CBRE Hong Kong, stated that geopolitical tensions and uncertain trade policies continue to impact Hong Kong's industrial and logistics market. Logistics tenants remain cautious and focus on cost-saving strategies, which have driven leasing activity in the short term. Although expansionary demand is limited, emerging industries are showing robust interest. The demand for warehouses that offer higher operational efficiency and competitive rental rates is the strongest, as companies seek to optimize costs. Tenants are also prioritizing facilities with modern specifications to support automation and technological upgrades, thereby enhancing productivity.

Zhen Junmin, executive director and head of the capital markets department at CBRE Hong Kong, mentioned that owner-occupiers remained active in Q3 this year, accounting for 34% of total investment, all invested in office and retail properties. Local investors have shown strong interest in hotels and standalone residential properties. Real estate funds are also returning to the market, particularly targeting opportunities for the redevelopment of student dormitories. Looking ahead, due to the continued rise in the Hong Kong Interbank Offered Rate (HIBOR), commercial real estate investors are expected to remain cautious Investment activities will be primarily driven by the demand from owner-occupiers and financially strained owners needing to sell assets to repay loans