As a real estate consultant specializing in office leasing, I have observed significant developments across the Hong Kong market that are poised to shape the landscape in 2025. With approximately 3.5 million sq. ft net of new supply expected this year, the market is set for notable changes. Key projects contributing to this increase in supply include Sun Hung Kai’s International Gateway Centre in Tsim Sha Tsui, accounting for over 2.1 million sq. ft net and Mandarin Oriental’s One Causeway Bay (410,000 sq. ft net).
The availability rate for office space in Hong Kong currently stands at 19.1% (c. 13.5 million sq. ft net) which signals tenant favourable conditions. The additional supply is anticipated to exert further downward pressure on rents which are forecast to decline by -7% to -9% over the course of the year. Consequently, the overall availability rate is projected to reach 22% by year end. Whilst we have seen a considerable improvement in new lettings (over 3.4 million sq. ft net) in 2024, the availability and new supply outweighs demand and this will continue for the foreseeable.
For occupiers, this new supply, coupled with ample availability, presents a wealth of opportunity. The increased choice in options allows businesses to reduce their monthly operating costs, build in lease flexibility, prioritize ESG requirements and improve building, space and cost efficiency. It allows occupiers to realign their Asia real estate strategy with their business objectives. A growing trend is “flight to quality,” where occupiers are moving to high-spec buildings that offer improved amenities and infrastructure.
Despite the high availability rate, the market experienced five consecutive quarters of positive net absorption, (c.1.1 million sq. ft net throughout 2024), the highest annual figure since the outbreak of COVID-19. This trend highlights the resilience and adaptability of the market, as businesses continue to seek out and occupy premium buildings in prime locations. Landlords, in response to the competitive landscape, have become more flexible and are now offering attractive financial and non-financial incentives to tenants. These incentives often include capital expenditure (CAPEX) contributions towards fit-out costs, and in some cases, landlords are undertaking the fit-out work themselves.
Demand for office space is being driven by several key sectors. Banking and Finance remains the major source of demand, accounting for 25% of the market throughout 2024. Consumer Products / Manufacturing (17%) and Professional services (16%) followed closely behind, while the Education sector is also on the rise, contributing 4% to the overall demand. These sectors are pivotal in shaping the dynamics of the office market, as they continue to expand and seek out premium office to support their business operations.
In summary, the Hong Kong office market in 2025 looks to present plenty of opportunities for tenants and landlords which will be characterized by an increase in supply, causing further downward pressure on rents. This environment is likely to drive movement in the market, where occupiers are attracted to high-quality, well-connected and located assets, that drive space and cost efficiencies. This interest and the proactive measures taken by landlords to attract new occupiers, is likely to drive increased office leasing take-up, underscoring the resilience of the Hong Kong market for the year ahead.
