The Hong Kong office investment market is navigating a significant period of adjustment. As of Q3 2025, the overall office capital values have dropped by about half from their peak. While transaction volumes remain subdued amid ongoing price discovery, recent fundamental indicators, particularly in the leasing market, suggest a foundation for stability is forming. This warrants a closer look at the path ahead.

Figure 1: Office transaction volume trend

Despite a standstill in the investment market, the leasing market has shown notablele strength. Net absorption saw a big uptick in Q3 2025, as tenants capitalised on favourable terms to upgrade to higher-quality premises. While this "flight-to-quality" is a positive sign, its long-term sustainability will depend on genuine business expansion rather than just tenant relocations alone. This trend is creating a distinctly two-speed market. Rents in prime assets across core locations such as Central are stabilising as demand concentrates at the top end. However, this masks a deeper challenge for older, lower-specification buildings. which face the risk of structural obsolescence as they struggle to compete.