Rebound in Hong Kong IPOs Not Enough to Revive Oversupplied Office Market 

Hong Kong was the world’s hottest market for IPOs in the first half of 2025 with funds raised from new listings jumping eightfold compared to a year earlier, but even that surge of activity proved insufficient to revive the city’s office markets, with analysts reporting that average rents for grade A space fell 3.4 percent from the end of 2024.

Grade A office rents in Hong Kong are now down 42.8 percent from their peak in the first quarter of 2019 with analysts seeing rollouts of new buildings overwhelming any recovery in demand in the near to medium term. 

“Despite the improving market sentiment, an ample new supply pipeline and high availability may continue to weigh on rental performance in 2H 2025,” said John Siu, managing director for Hong Kong at Cushman & Wakefield.

With net uptake of office space remaining subdued, some property researchers are predicting that landlords will need to wait several years to see an upturn in leasing rates.

Relocations Rule

With office  vacancy still at 19.3 percent city-wide, according to C&W, average rents fell 1 percent from April through June, slowing from a 2.5 percent dip in the first three months of the year. Extending a 25-month slide, leasing rates at the end of June were down 7.4 percent from a year earlier.

The drop in rents came despite tenants signing leases for 1.2 million square feet (111,484 square metres) of space during the second quarter – the largest amount since 2019. 

With many deals representing occupiers moving from one office to another, the net gain in space leased was just 71,400 square feet, C&W said. That net take-up represented a nearly 50 percent drop from the first quarter level.

Hong Kong’s traditional commercial core was the most sought-after location in the second quarter, with Greater Central — which adds Admiralty and the Sheung Wan area just west of Central to the city’s primary office hub — accounting for 34 percent of space leased during the period.

That desire for Central addresses correlates with cheaper space as rents in the district slid 0.9 percent from the prior quarter to HK$76.50 ($9.75), marking a 45 percent decline from their 2019 peak. Rents for properties in Prime Central — a set of top grade buildings in the city’s core — eased by 0.6 percent to HK$89.30, and are now 46 percent below their peak.

Greater Tsim Sha Tsui saw the gentlest rent decline among the city’s top business hubs, with office rates in the Kowloon commercial district dipping 0.1 percent to an average of HK$42.20. Landlords in Wan Chai and Causeway Bay lowered their rents by an average of 1.7 percent in the period to HK$45.30.

IPOs Boost Finance Sector

With IPOs expected to remain active in the remainder of the year, JLL anticipates that rents for prime Central buildings will stabilise later this year, bolstered by demand from legal firms and financial services firms.

Spurred by the IPO comeback, relocations and expansions by banking and finance as well as insurance occupiers drove Hong Kong leasing in the second quarter, with the industries accounting for 70 percent of new area leased, which was up from 46 percent in the prior quarter, per Cushman & Wakefield.

The biggest transaction in the quarter was Jane Street signing for 207,400 square feet in Henderson Land Development’s waterfront Site 3 project in Central, with the Manhattan-based quantitative trading firm set to relocate from Hongkong Land’s Charter House in Central in 2027.

Among the quarter’s other large commitments, FWD Group, an insurer controlled by tycoon Richard Li, leased 107,000 square feet of net floor area in Devon House in Swire Properties’ Taikoo Shing complex in Quarry Bay. In another notable leasing transaction, Taiwan-based Cathay United Bank secured 38,800 square feet in Mandarin Oriental Hotel Group’s One Causeway Bay project at 281 Gloucester Road.

New Supply to Depress Rents

While the return of Hong Kong’s IPO market is good news, analysts expect overall rents to continue trending down in the second half of 2025, with Cushman & Wakefield forecasting a 7 to 9 percent decline for 2025 as a whole, while JLL anticipates a more modest 5 percent dip over the same period. 

A major cause of the rent slide is the approximately 6.7 million square feet of net increase in office space coming to Hong Kong through the launch of new office projects in the coming three years.

Assuming the financial sector and the city’s broader economy recovers sufficiently to push office leasing to above pre-pandemic levels, when tenants were taking up approximately a net 1.7 million square feet per year, Hong Kong vacancy may peak in 2026. 

With net levels of new supply expected to ebb to 1.5 million square feet annually from 2029 to 2032, Savills predicts a rebound in Hong Kong office rents from 2032 as vacancy is expected to fall below 6 percent.