Hong Kong Real Estate Market Continues Recovery Momentum in Q2 2026

Snapshot for H1 2026

• Grade A Office: Hong Kong's office market recorded a noticeable improvement in leasing sentiment in H1 2026, with leasing momentum growth and positive net absorption led by Central and Greater Tsim Sha Tsui.
• Retail Leasing: Retail demand remained healthy, causing improvement in high street shop vacancy and support sustained, yet mild rental growth in H1 2026.
• Industrial & Logistics: Industrial leasing volume surged to its highest quarterly level in four years, supported by occupier expansion and forced relocation demand, resulting in strong absorption despite continued rental declines.
• Investment: Investment volume jumped noticeably in H1 2026 compared with last year, driven mainly by end-user demand. Office continued to attract most capitals, while purchases for student accommodation remained a popular investment theme.
• Luxury Residential: Hong Kong’s luxury residential market remained resilient during the second quarter, with rising luxury residential prices despite softer transaction volumes.

Hong Kong’s commercial real estate market continued to gain traction in the second quarter of 2026, supported by improving fundamentals such as positive, broad-based GDP growth, increasing tourist arrivals and retail sales, momentum in IPO activity and strengthened investment sentiment, according to CBRE. 

“Hong Kong’s property market continued to show encouraging signs of stabilisation and recovery in the first half of 2026. Occupier demand strengthened across the office and logistics sectors, driving positive net absorption and lower vacancy rates in several market segments. Beyond the leasing market, investment sentiment also improved, with commercial real estate transaction volume posting a notable year-on-year increase despite ongoing uncertainties about geopolitical tensions and capital flows between the Chinese Mainland and Hong Kong. Looking ahead, we expect market sentiment will further strengthen, driven by improving business confidence and resilient economic fundamentals to support market activity through the remainder of the year. Transaction volume is set to further improve across the leasing and investment markets in H2 2026,” said Marcos Chan, Executive Director, Head of Research, CBRE Hong Kong. 
                  
Review and Commentaries 

Grade A Office 

• Leasing momentum strengthened in Q2 2026, rising by 23% q-o-q to 1.1 million sq. ft.. This brought the H1 2026 total to 2.1 million sq. ft., reaching 48% of 2025’s full-year figure. Central led leasing activity with 100 deals in H1 2026, its highest first half number since 2019.
• Citywide net absorption reached 569,600 sq. ft. in Q2 2026, bringing the total for H1 2026 to 945,000 sq. ft. and improving from the -88,000 sq. ft. seen in H1 2025. All major submarkets reported positive net absorption for the quarter, led by Greater Tsim Sha Tsui with 163,500 sq. ft., and Central with 104,300 sq. ft. Hong Kong East recorded 104,400 sq. ft. of net absorption, supported by strong demand from the insurance sector. This pushed its H1 2026 total to 119,000 sq. ft., the highest half-year figure since H2 2022. While Kowloon East recorded 35,500 sq. ft. this quarter, Q1 2026’s negative figure ensured its H1 2026 total stood at -95,500 sq. ft..
  
• The lack of new supply combined with positive net absorption led citywide vacancy to fall by 0.6-ppt to 16.2%, marking a second consecutive quarterly decline.
• Overall rents increased by 2.0% q-o-q and 3.5% y-t-d, reversing declines seen in H2 2025. Central rents grew 10.7% y-t-d, mainly due to Central A1 rents jumping 18.5% y-t-d back to levels last seen in Q2 2022. Greater Tsim Sha Tsui recorded a fourth consecutive quarter of rental growth with a 1.2% increase. Decentralised submarkets continued to report q-o-q declines.

Ada Fung, Chief Operating Officer, Advisory Services, CBRE Hong Kong: “The office market is benefiting from a renewed focus on workplace quality and location, particularly among financial services, insurance and professional services occupiers. Central’s strong leasing performance and rental rebound demonstrate that tenants continue to value premium locations. We are also seeing growing interest in West Kowloon, where two of the largest office leasing transactions in H1 2026 were completed, highlighting the district’s appeal as a gateway to the Greater Bay Area through its direct connection to the High-Speed Rail network. Hong Kong’s achievement in various global top economic and financial market rankings, coupled with positive net absorption in key business districts, are helping support market sentiment. We expect rental and vacancy trends will remain uneven across submarkets, with stronger demand for space in prime locations likely to  benefit landlords.”

Retail 

• After strong Q1 2026 growth of 12.1% y-o-y, retail sales increased by 8.6% y-o-y in April and 7.9% y-o-y in May, marking a 13th consecutive month of expansion. Momentum was partly supported by an increase in tourist arrivals, which rose by 9.1% y-o-y, adding to 17.0% growth in Q1 2026.
• Leasing activity in core districts accelerated this quarter, with leasing volume jumping 55% q-o-q to 337,100 sq. ft., pushing up the H1 2026 total to 48% of 2025’s full-year total. 
• F&B demand strengthened, with the sector representing one-third of the quarter's volume. Fashion remained the second most active sector, with increased activity from mainland Chinese brands. The cosmetics sector experienced its strongest quarter since Q2 2023.
• Vacancy rates for high street shops in core districts fell by 0.3-ppt q-o-q to 6.5%, the second lowest level since Q4 2019. Low vacancy contributed to a 1.0% q-o-q increase in rents, marking the sixteenth consecutive quarterly rise and bringing y-t-d growth to 1.8%.
  
  

Lawrence Wan, Executive Director, Head of Retail Leasing, CBRE Hong Kong: “Retail leasing momentum continued to strengthen in Q2, supported by rising visitor arrivals and improving consumer sentiment. Demand is becoming increasingly diversified, with F&B operators, lifestyle brands and mainland Chinese retailers actively seeking expansion opportunities in Hong Kong's core shopping districts, and some retailers adjusting their store networks in response to changing consumer behaviour. The current environment reflects a healthy rebalancing process as landlords and occupiers reposition their strategies to align with evolving consumer demand. As vacancy continues to trend down in the core districts, prime street rents are expected to maintain gradual growth.”

Industrial & Logistics  

• Aggregate trade increased by 42.5% y-o-y in April-May 2026, following a 34.6% increase in Q1 2026. Container throughput declined by 1.1% y-o-y in April-May but air cargo throughput rose by 3.9% during the same period.
• New leasing volume for Q2 2026 amounted to 1.6 million sq. ft., a rise of 118% y-o-y and the highest quarterly level since Q2 2022. Growth was primarily driven by electronics sector expansion and forced relocation from brownfield sites in the Northern Metropolis.
• During the quarter, warehouse landlords became more willing to lower asking rents to improve occupancy. Vacancy dropped by 1.2-ppt q-o-q to 11.6%, indicating positive net absorption of 569,200 sq. ft., the highest since Q3 2023. Warehouse rents fell by a further 2.2% q-o-q, marking the tenth consecutive quarterly rental decline and bringing the total contraction in percentage terms from the peak achieved in Q4 2023 to 15.6%.

Samuel Lai, Executive Director, Head of Industrial & Logistics, CBRE Hong Kong: “Hong Kong’s warehouse market regained momentum in the first half of 2026, with leasing volume reaching its highest level since the pandemic. Demand was driven by expansion from electronics-related occupiers, alongside relocation requirements arising from brownfield site redevelopment in the Northern Metropolis. This combination of organic growth and forced relocation has helped absorb some available space and improve overall occupancy. This improvement in vacancy, however, is also driven by landlords’ increasing willingness to lower asking rents. ”              

Commercial Real Estate Investment

• While the U.S. federal funds rate remained unchanged this quarter, more economists expect at least one rate hike by the end of 2026. The benchmark 1M-HIBOR rose from 2.24% on March 31, 2026, to 2.94% on June 30, 2026. The negative yield carry condition associated with many commercial properties in Hong Kong continues to persist.
• Investment volume* dropped 15% y-o-y to HK$8.1 billion in Q2 2026 but increased 50% y-o-y to HK$23.1 billion in H1 2026. Activity remained driven by the education sector and end-user demand.
• Institutional investors continue to search for commercial and single-owned residential properties for conversion into student accommodation. Highlights included Singapore’s Wee Hur Capital acquiring One Bedford Place, an office building in Tai Kok Tsui, for HK$720 million for conversion, and Crystal Investment purchasing two assets in Kowloon City and Hung Hom for a total of HK$443 million.
• During the quarter, developers were seen to be targeting redevelopment sites to replenish their land banks as residential market performance improves. Major acquisitions included Chinachem Group’s purchase of the whole block of North Point Terrace for over HK$1.9 billion for redevelopment.
• The number of deals* in Q2 2026 rose by 76% y-o-y to 30. 14 involved financially stressed assets transacted for HK$3.2 billion as considerable discounts succeeded in enticing investors and end-users.
  
  *deals involving commercial real estate over HK$77 million.
  
  

Reeves Yan, Executive Director, Head of Capital Markets, CBRE Hong Kong: “Investment activity gained momentum in the first half of 2026, with transaction volume posting a noticeable year-on-year increase despite a marginal escalation in local interest rates. End-users continued to be the primary driver of market activity, while demand from education-related occupiers and long-term investors remained robust, particularly for assets suitable for student accommodation conversion and corporate headquarters. At the same time, capital values remain under downward pressure due to high financing barriers and cautious pricing expectations. Distressed sales continue to create attractive entry points, allowing opportunistic investors and end-users to acquire quality assets at discounted levels.”

Luxury Residential

• Hong Kong’s luxury residential market remained resilient during the second quarter, with rising luxury residential prices despite softer transaction volumes. According to the Rating and Valuation Department luxury residential index (Class E properties with saleable area of 1,722 sq. ft. or above), prices increased approximately 2% during Q2 2026 and 3.9% year-to-date, extending the current growth streak to twelve consecutive months and lifting prices 10% above the market trough recorded in March 2025.
• Transaction activity moderated during the quarter, with total consideration declining 30% from HK$12.56 billion to HK$8.76 billion and the number of deals falling from 70 to 48 transactions. Nevertheless, luxury demand remained underpinned by wealthy buyers, particularly from mainland China. Mainland purchasers accounted for approximately 50% of luxury transactions above HK$100 million during Q2 2026 and represented as much as 60-70% of primary luxury market activity.
• Several trophy transactions highlighted the continued appetite for ultra-prime residential assets. Limited future supply remains a key supporting factor, with only around 170 luxury units and houses expected from forthcoming projects in The Peak and Southern District. 

Eddie Kwok, Executive Director, Valuation & Advisory Services, CBRE Hong Kong: “Hong Kong’s luxury residential market continues to benefit from strong underlying wealth creation and capital inflows. Although new outbound investment regulations from Mainland China may temporarily impact buying appetite among certain buyers, demand from high-net-worth individuals remains resilient. Combined with limited supply in prime locations and improving financial market conditions, we expect luxury residential prices to move within a range of 5% to 10% growth in 2026 depending on interest rate movements.”

Outlook

CBRE expects occupier markets to further improve in the second half of 2026. Improving demand fundamentals and robust IPO pipeline activity should support further market recovery, while capital market activity is expected to remain selective until financing conditions become more favourable. Luxury residential demand is anticipated to remain resilient amid the constrained supply.