HONG KONG, 10 December 2025 – After a six-year correction that began in late 2019, Hong Kong's property market has turned the corner, with office leasing and housing markets leading the recovery in the fourth quarter of 2025. JLL forecasts Central's Grade A office rents and mass residential prices to rebound 0-5% in 2026.

Cathie Chung, Senior Director of Research at JLL, said: "Persistent oversupply and elevated vacancy rates are expected to continue exerting downward pressure on rental levels across Hong Kong's Grade A office market. Nevertheless, Central and Tsimshatsui are exhibiting a more resilient demand recovery from hedge funds, wealth management and other financial institutions — outpacing expectations — and are already delivering a sooner-than-anticipated rebound. Meanwhile, the residential sector remains supported by mainland buyers. However, the recovery is expected to be uneven, with office rents outside Central and Tsimshatsui still under pressure and price corrections persisting across retail, industrial and investment markets."

Key points:

• We forecast Central rents to rise by 0-5%, while rents in the overall market may drop by a further 0-5%.
• High Street shops rents are expected to fall by 0-5% next year, with Prime shopping malls declining by a further 5-10%.
• Prime warehouse vacancy rates have surged to a decade-high of 10.1% at the end of 2025, with rents down 7.2%.
• We expect capital values of Grade A office to drop 0-5% next year, while prices of High Street shops are expected to fall 5-10%.
• The housing market achieved a soft landing in the second half of 2025. Prices of mass residential are expected to rise about 5% in 2026.
• The Government should prioritise releasing larger urban sites with mature infrastructure for tender as developers' appetite for land acquisition strengthens.

After a six-year correction that began in the second half of 2019, Hong Kong's Grade A office leasing market is likely to reach a trough in 2026. Central and Tsimshatsui are leading the rebound, posting rental growth of 0.5% and 0.2%, respectively, in the second half of the year. Net absorption reached 1.63 million sq ft during the period, the highest level since the first half of 2019, indicating that firms are once again expanding rather than merely consolidating. The recovery is underpinned by strong demand from hedge funds and private banking and wealth management centres. Both bank deposits and the number of SFC licensed professionals hit record highs in 2025.

These high affordability tenants are seeking expansion and/or upgrade to premium Grade A office buildings such as the IFC portfolio and future Central Yards project, which offer large floor plates and convenient MTR access. This trend has supported Central's 0.5% rental growth and reduced its vacancy rate to 10.9% in the second half. Conversely, decentralised areas like Hong Kong East and Kowloon East continue to experience significant rental corrections and high vacancy rates, highlighting a diverging market performance.

Sam Gourlay, Head of Office Leasing Advisory, at JLL in Hong Kong Island, said: "2026 is expected to be a year of divergence, where we can repurpose the adage that it is a 'market of offices, not an office market'. The recovery will continue to be led by financial services firms, with Central's office market benefiting most. We forecast Central rents to rise by 0-5%, while rents in the overall market may drop by a further 0-5%. Overall vacancy rates are likely to plateau at 15% due to abundant supply offsetting the increased demand. With rental declines slowing, the market appears to be at or near its floor, creating an opportune time for tenants to secure long-term leases."

Hong Kong Grade A Office Indicator – % Change

Retail rents remained under pressure this year, particularly in prime shopping malls where vacancies continue to stay at a high level. Rents at Prime shopping centres and High Street shops fell by 9.1% and 7.7% in 2025, respectively, although vacancy rates for High Street shops showed a slight improvement.

Further rental corrections have prompted tenants to upgrade to prime locations and attracted new entrants to Hong Kong, who are taking advantage of lower rental levels. This has driven leasing activities, though it remains concentrated in core shopping districts, notably Causeway Bay and Central.

The change in dinning preferences and heightened regional competition has prolonged restructuring in the F&B sector. Restaurant receipts of non-Chinese restaurants rose by 3.9% y-o-y in the first three quarters, while Chinese restaurant receipts declined by 4.0%.

Jeannette Chan, Senior Director of Retail at JLL in Hong Kong, said: "Despite closures among long-established F&B operators, demand from tenants seeking upgrades and new entrants remain resilient. Leasing activity is expected to stay robust next year, underpinned by further rent softening. Vacancy rates are likely to stay elevated, as closures outpace new take-up in 2026 amid a weak employment outlook and persistent imbalance between outbound and inbound travel."

She forecasts High Street shop rents to fall by 0-5% next year, with prime shopping malls declining by a further 5-10%.

Hong Kong Prime Retail Indicator - % Change

Hong Kong's logistics market remains challenging in the extended post-COVID period. Significant structural changes, including greater use of routes that bypass the city, retailer-led consolidation and reallocation of storage for cost efficiency, and continued global supply chain reconfiguration, have weakened local storage demand. Prime warehouse vacancy rates have surged to a decade-high of 10.1% at the end of 2025, with rents down 7.2%.

Conversely, the growth of online retail is emerging as a key driver of demand for modern logistics facilities, particularly those offering automation and proximity to urban delivery networks.

Investment sentiment remains subdued amid a weak rental outlook, with capital values for prime warehouses falling by 10.3% in 2025. The market will continue to be supported by end-user demand next year, while more ground-floor units in industrial buildings are expected to be converted into EV charging stations, enhancing asset value.

Joseph Lam, Head of Logistics and Industrial at JLL in Hong Kong, said: "Vacancy rates for prime warehouse will remain elevated next year due to limited demand amid structural economic changes. Rents and capital values are forecast to decline by a further 5-10%."

"To ease oversupply, the Government should reassess logistics demand and review the logistics land supply, specifically in the coming Northern Metropolis development. If Hong Kong aims to become a logistics hub for high-value goods, space requirements can be far smaller than for traditional FMCG (Fast-Moving Consumer Goods) products," he added.

Hong Kong Industrial indicator - % Change

Despite several rounds of rate cuts since September 2025, Hong Kong's commercial investment market remained subdued amid credit tightening and economic uncertainties. Total investment in transactions above HKD 50 million reached HKD 15.9 billion in the second half of 2025, bringing the full-year total to HKD 31.6 billion.

In the second half of 2025, office transactions dominated the market and accounted for 63.8% of total investment volume, while end-users, particularly occupiers seeking for quality properties, remained the most active buyers. Capital values of overall Grade A offices fell 2.7% in the second half of 2025, moderating from 4.3% in the first half, with a full-year decline of 6.9%.

Capital values of High Street shops fell a further 7.7% in the second half after dropping 10.2% in the first half, with capital values plunging 17.1% in 2025 alongside a significant yield expansion. With retail sales showing early signs of stabilisation and yields remaining attractive, some local investors have re‑entered the market.

Oscar Chan, Head of Capital Markets at JLL in Hong Kong, said: "Looking ahead to 2026, end-users are expected to remain the dominate force in the commercial property investment market, particularly in the office sector, where occupiers continue their flight-to-quality toward premium buildings in core locations. Investor interest in hotel and living sectors is set to grow, supported by the ongoing recovery in tourism and the potential to convert these assets into purpose-built student accommodation (PBSA). Grade B office transactions may also increase as conversions to PBSA also gain traction. However, tight credit conditions on commercial real estate loans and persistent macroeconomic uncertainties will continue to pose key challenges, keeping overall prices in search of a bottom. We expect capital values of Grade A office will drop 0-5% next year, while prices of High Street shops will fall 5-10%."

Hong Kong Investment Indicator – % Change

The housing market achieved a soft landing in the second half of 2025. The JLL Mass Residential Capital Value Index rose 1.4% in the first eleven months, while transactions of new and second-hand homes surged 20.3% y-o-y to 51,000 units in the first ten months. The upward momentum was primarily driven by the return of mainland buyers, who were particularly active in the primary market. The sector also benefited from recent interest rate cuts, sustained momentum driven by stamp duty relaxation and the wealth effect created by the strong stock market.

In recent years, the market has faced challenges from elevated inventory levels, requiring 101.6 months and 67.4 months to clear stock in 2023 and 2024, respectively. Unsold inventory is now declining, and the supply month is expected to return to the 2015-2021 average level of 51.3 months by end-2025. Meanwhile, private housing supply is expected to normalise by end-2026, with supply month further reducing to just 44.7 months.

Joseph Tsang, Chairman of JLL in Hong Kong, said: "Housing prices have bottomed out, and the outlook for 2026 is cautiously optimistic. We expect capital values in the mass residential segment to rise by about 5%, while luxury residential values will remain broadly flat. Luxury rents are projected to increase by 0–5%. Young or new housing estates will enjoy a higher upside potential. Market sentiment should remain supported by active sales of new launches, with prices likely to trend upward. Recent Prime Rate cuts and the anticipated further reductions will further ease financing costs, while pent-up demand continues to unwind, providing sustained momentum for transactions."

However, he cautioned that macroeconomic uncertainties, the ongoing commercial real estate crisis and rising unemployment will continue to weigh on the housing market next year.

Hong Kong Residential Indicator – % Change

Land prices in government land sales in the second half of 2025 moved toward the upper end of market expectations. The last time where land prices exceeded market expectations by over 30% was in 2021. This reflects that developers have regained their appetite for land acquisition and confidence in the residential market, particularly for urban land with suitable size and consideration.

However, it does not guarantee the successful sale of plots in the Northern Metropolis. Alkan Au, Head of Value and Risk Advisory at JLL, said: "Developers remain hesitant towards large-scale projects requiring heavy infrastructure investment as the housing market has not fully recovered. To sustain the land price with more concrete demand, the Government will have to lead with upfront public investment in infrastructure and adopt an 'industry-first' approach. Land in the area shall serve as a platform for innovation, education hubs and high-value industries rather than a source of fiscal revenue. Flexible partnership models such as profit-sharing or joint ventures will be key to attracting developers’ interest."

"In addition, the Government should prioritise releasing urban sites with existing or near-complete transportation networks and utilities, as these are more attractive to developers. Larger urban land parcels are likely to attract greater interest as developers' appetite for land acquisition strengthens. However, interest in collective sales for redevelopment will remain weak until housing prices show a clear upward trend," he added.