Emerging Sectors Drive Hong Kong Office Recovery; Occupiers Embrace Flexible Strategies

CBRE today unveiled its latest three-year report, “The Evolution of the Hong Kong Grade A Office Market – A Telescopic Analysis 2025”, offering a comprehensive review of market dynamics from 2022 to 2025 and predicting trends through 2028.

Key highlights for the study period between April 2022 and March 2025:

• Despite the strong focus on cost-saving, some sectors expanded their office footprint. This pushed up total occupied space by 1.1 million sq. ft..
• Growth was partly driven by non-traditional occupier sectors that are typically less active in the Grade A office market. Many key industries remained in contraction mode.
• Despite the rise in occupancy, a significant supply boom caused citywide vacancy rates to nearly triple from the level seen immediately prior to the COVID-19 pandemic. Vacancy now stands at an all-time high of over 17%.
• Seven million sq. ft. of new Grade A office space was added during the study period, a figure 2.3x greater than that seen in the previous study period from April 2019 to March 2022.
• Such a high level of new supply, measured on a three-year rolling basis, has not been seen for 15 years.
• Take-up of new space has been slow. 55% of stock completed during the study period remains unleased, contributing 3.9 million sq. ft. to citywide vacancy.
• Despite the increase in stock, total new leasing volume edged up by just 3% from the previous study period, averaging 987,000 sq. ft. per quarter.
• This figure is 22% lower than that recorded by the same study conducted by CBRE during the market peak from April 2016 to March 2019.
• Increased vacancy pressure has resulted in a prolonged decline in rents. Rents fell by another 17% during the study period, a slower decrease compared to the 27% drop observed in the previous study period from April 2019 to March 2022.

CBRE has identified several transformative trends that have emerged in the Hong Kong Grade A office market over the past three years. These are:

• Resumption of growth in total occupancy, growing by 1.1 million sq. ft. in total.
• Accelerated growth of emerging sectors, led by the public and education sectors, as well as emerging non-bank financial firms.
• Reduced presence of new occupiers.
• Shift in corporate footprint, with local companies growing their presence while MNCs downsizing.
• Slower pace of decentralisation, space involved has fallen for two consecutive study periods.
• Growth in green footprint; landlords were active in building retrofits to achieve green standards.
• Increased ownership demand; end-users have gained shares in occupied space.
• Slower absorption of new buildings during a supply boom.
• Downscaling of the shared office sector.

“Hong Kong’s Grade A office market is entering a new phase of recalibration,” said Marcos Chan, Executive Director and Head of Research, CBRE Hong Kong. “The expansion of over 430,000 sq. ft. by education institutions and non-bank financial firms, alongside the recovered demand from retail-related and insurance firms , signals a dynamic shift in occupier demand. Despite the noticeable jump in new supply and hence vacancy rates, occupier demand is clearly recovering and will continue to fuel the office leasing market as Hong Kong’s services sectors accelerate their growth momentum. ”

Outlook Trends Through 2028

CBRE is confident about Hong Kong’s economic prospects.

Hong Kong’s recent improvements in various global rankings have bolstered confidence in the economy, enhancing the city's fundamentals and extending its capacity to attract global businesses, capital, and talent across multiple sectors. Economic momentum will primarily be fuelled by the government's initiatives to support new industries, which will work alongside the steady growth of the city’s traditional pillar industries.

Improving economic conditions are expected to lead to a recovery in Hong Kong office demand in the coming years. Leasing activity is anticipated to increase over the next three years compared to the period from 2022 to 2025. Growth will be driven by:

• The continuous recovery and steady growth of traditional service industries.
• An uptick in mainland Chinese enterprises establishing a presence in Hong Kong.
• Emerging demand from new economic sectors.
• Occupiers upgrading to office space in newly developing strategic locations.

CBRE expects the following trends to characterise the Hong Kong Grade A office market in the next three years:

• Rethinking workplace strategies to align with the new normal
• Divergent submarket landscape, with competition focusing on various Kowloon decentralized submarkets.
• Onset of a space-digestion period, as stock growth starts to slow in the next three years.
• More forced relocation and upgrading demand as building conversion and end-user purchase demand climbs.
• A sustainable occupancy recovery in Central, led by financial sector firms.
• Tsim Sha Tsui West will emerge as a new and alternative hub for financial firms.
• Reduced decentralization moves due to less new supply in decentralised submarkets.
• Landlords will continue to be accommodative and there will be a rise in green leases.

Future 2025-2028: New Chapter for Hong Kong’s Grade A Office Landscape

“As Hong Kong’s economy gradually recovers, the Grade A office market is reshaping itself, entering a ‘space digestion’ phase. Leasing activity is expected to pick up over the next three years, driven by the steady rebound of traditional service sectors, the expansion of mainland Chinese enterprises, and emerging demand from new industries. While overall vacancy rates remain elevated, performance will vary across submarkets depending on local supply-demand dynamics. Tsim Sha Tsui West is expected to be a rising submarket with strategic appeal, alongside the traditional CBD,” said Ada Fung, Head of Leasing & Consulting, CBRE Hong Kong.

Fung added: “Tenants are increasingly prioritising flexibility and wellness-driven environments. In response to persistent vacancy and evolving tenant needs, landlords are adopting more flexible leasing strategies. These include turnkey office packages, shared amenities such as cafés and wellness spaces, and green lease incentives aligned with corporate ESG goals. Such offerings are particularly appealing to smaller occupiers and startups seeking cost-effective, ready-to-use solutions. Landlords who can tailor their offerings to meet these evolving needs will be best positioned to succeed and thrive in the next phase of market evolution.”

To read the full report, click here.

Notes to Editors

This fourth edition of "The Evolution of the Hong Kong Grade A Office Market – A Telescopic Analysis" tracks changes in the status of individual occupiers, categorising them by occupier industry sector, company origin, submarket, and size. 

Data was primarily collected from building stacking plans compiled by CBRE, supplemented by desktop research. For this edition, CBRE re-audited occupier industry sectors to identify additional micro trends. All period-over-period analyses are based on the most recent classifications.