Hong Kong office The real estate market is likely to see more Faltering sales In the medium term, banks will need to seek loans amid weak demand for office space, according to analysts.
Since their peak in October 2018, prices for prime office space in the city’s main business districts of Sheung Wan/Central, Wan Chai/Causeway Bay and Tsim Sha Tsui have fallen by more than 46 per cent as of November, according to the latest data from the Rating and Valuation Department.
Meanwhile, overall rents in the city’s premium office space sector are estimated to have fallen by 8.6 per cent this year, according to real estate firm JLL. The real estate consulting firm expects office rents to fall by up to 10 percent in 2025.
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“A few years ago, lease transactions were up to 50,000 square feet, but now lease transactions are only 18,000 square feet, so the rents couldn’t fund the loans,” said Oscar Chan, head of capital markets at JLL in Hong Kong. “For banks, if a borrower defaults for a year or two already, they have to take action no matter what. Certainly, in two to five years, there will be more cases where banks take action.”
“Towards the end of 2024, the office market showed a mixed performance,” said Tom Ko, executive director and head of Hong Kong capital markets at real estate broker Cushman & Wakefield. Looking to 2025, the outlook for the office market indicates continued challenges.
Forecasts for Hong Kong’s office property market in 2025 indicate continued challenges. Photo: Dixon Lee alt=Forecasts for Hong Kong’s office property market in 2025 indicate continued challenges. Photo: Dixon Lee>
Weak sentiment in the city’s office real estate market could lead to underselling of hard-hit commercial properties next year.
“More distressed sales are expected as market conditions persist,” Kuo said. “A potential decline in interest rates may lead to increased transaction activity, but the overall market is expected to remain under pressure due to ongoing corrections and financial constraints.”
“While the office sector accounts for 43 percent of total transaction numbers, indicating a certain level of activity, the market is going through corrections with significant reductions in asking prices,” he said. “This has attracted end users looking to acquire assets for future rental savings.”
“The pure investment market continues to face challenges due to rising interest rates, which leads to a slowdown in overall investment activity,” Ko noted.
He added that this environment “led real estate owners to offer discounts on real estate disposal prices, which contributed to a further correction in real estate prices.”
According to data from Midland IC&I, a subsidiary of Midland Holdings, Hong Kong’s office market has seen a rise in property sales in recent months.
Office deals It rebounded in November with 91 transactions registered, an increase of 54.2 per cent compared to deals in October and the highest monthly figure since May 2023, according to the commercial property agency.
One notable deal recorded that month was Hong Kong Metropolitan University valued at HK$2.65 billion (US$341 million). Acquisition of Cheung Kei Center in Hung Hom. This marks the city’s second-biggest office deal of the year, following the HK$6.4 billion sale of the Nexxus building in Central to companies and entities linked to Taiwanese tech mogul Steve Chang in February.
A view of office buildings in Hong Kong’s central financial district. Photo: Dickson Lee alt=View of office buildings in Hong Kong’s central financial district. Photo: Dixon Lee>
Meanwhile, Bonham Majors – with a gross floor area of 86,005 square feet – was recently purchased for about HK$1.3 billion by Chiyu Banking Corp, according to Midland IC&I. Appliance maker and retailer German Pool has acquired several floors, totaling 20,500 square feet, at Rydakan Capital Tower in Kwun Tong for HK$164 million.
In the office leasing market, landlords are unlikely to find relief that 3 million square feet of new space will come online in 2025.
Characteristics of Sun Hong Kai 2.1 million square feet of space will come to market next year, when the Gateway International Center in Tsim Sha Tsui is completed, according to Cushman. One Causeway Bay, Mandarin Oriental and Hong Kong land The project will add 410,400 square feet, while SEA Holdings will add 310,700 square feet from its project in Kowloon East.
Fiona Ngan, head of tenant services at Colliers, said: “Lease renewals will dominate the office leasing market in 2025, with most companies intending to retain their existing portfolio of office space for cost optimization.”
“We see that mainland Chinese companies have been keeping up Leasing momentum “In relatively small to medium-sized office space,” Ngan said. “However, given the current structural imbalance in supply and demand for office space and the upward vacancy rate, we expect a 9 percent downward adjustment in rents in 2025.”
