DBS analysts led by research director Jeff Yau note that hedge funds, asset managers and wealth managers are expanding their presence in Central, alongside a wave of acquisitions by end-users.
In 4Q2025, hedge fund Qube Research & Technologies pre-leased six floors totalling 146,000 sq ft at 2 IFC in the International Finance Centre, the second-tallest building in Hong Kong.
UBS, which currently occupies the space, will cross the Victoria Harbour and relocate to the new International Gateway Centre, adjacent to the West Kowloon High Speed Rail Terminus.
See also: HK IPO revival hits snags, raising stakes for big deals
In June 2025, Jane Street — a quantitative trading firm and liquidity provider — secured six floors totalling 223,437 sq ft as the anchor tenant at the upcoming Central Yard Phase 1, opposite 2 IFC.
Other major leases include Point72 Asset Management, which recently increased its space at The Henderson to 85,000 sq ft, up from 60,000 sq ft previously.
The recovery is reflected in an improvement in Hongkong Land’s Central portfolio. On a committed basis, vacancy across the Singapore-listed property group’s Central portfolio improved to 6% in December 2025 from 6.9% in June 2025.
See also: Hong Kong woos central banks in bid to become gold-trading hub — Bloomberg
Rising occupancy across Hongkong Land’s Central portfolio is supported by strengthening leasing momentum amid robust capital market activity and a healthy IPO pipeline, says DBS. “The ‘flight-to-quality’ trend has continued to benefit premium assets in core Central.”
Analysts attribute the pickup in demand to strong market activity. The Hang Seng Index has recovered to around 26,000 points, while trading volumes and fundraising activity have surged. “Average daily turnover surged 89% y-o-y to HK$250 billion ($41.1 billion) in 2025, with the momentum continuing into 2026, reaching HK$272 billion [year to date]”, write DBS analysts.
Mixed outlook for offices
Outside of the premier Central area, however, DBS analysts warn that the story is playing out differently in other submarkets.
Tsim Sha Tsui is showing early signs of bottoming out, says DBS, supported by expansion from banks and insurance companies. Vacancy rates in the district have edged down to around 7.2% in December 2025 from 7.9% in June 2025 and 8.9% in December 2024.
Office rents there also showed signs of stabilisation, rising 0.9% in 2H2025. For the full year, however, rents in the submarket still recorded a 0.8% decline.
Still, DBS analysts are optimistic that Tsim Sha Tsui will post rental growth of 0% to 3% in 2026, just behind Central’s 5% projected rental growth.
In contrast, decentralised office markets such as Kowloon East and Island East “continue to face significant headwinds”, says DBS.
Elevated vacancy rates — nearing 20% in Kowloon East and 13% in Island East — are expected to keep rents under pressure, with declines of 3% to 5% projected in both areas the coming year.
Falling office values lure buyers
Hong Kong office capital values continued to decline in 2025, presenting potential opportunities for long-term owner-occupiers, says DBS. According to JLL, Hong Kong office capital values fell 2.7% in 2H2025, after declining 4.3% in 1H2025.
Hong Kong office prices have corrected by approximately 47% since 2019, and corporations are increasingly choosing to buy rather than lease space, taking advantage of lower valuations.
Chinese technology giants have led this trend. In one of the largest transactions of 2025, Alibaba Group and Ant Group acquired the top 13 floors of One Causeway Bay, totalling 301,555 sq ft, to establish their Hong Kong headquarters. JD.com also acquired a 50% stake in the prime CCB Tower from Lai Sun Development for HK$3.5 billion; China Construction Bank holds the remaining 50% stake.
Educational institutions, in particular, have emerged as a “new source of demand”, notes DBS. City University of Hong Kong’s acquisition of Festival Walk Tower from Singapore-listed Mapletree Pan Asia Commercial Trust for HK$1.96 billion grows the college’s campus, which is located directly opposite the Festival Walk complex.
The transaction of the four-storey office building with a lettable area of 213,982 sq ft is equivalent to HK$9,160 psf. Based on the disposal price and estimated office rents of HK$30 to HK$32 psf, DBS estimates an exit yield of approximately 3.9% to 4.2%, “broadly in line with that of Cheung Kei Center, which was sold to Hong Kong Metropolitan University in November 2024”.
Office supply expected to normalise
For 2025, the entire Hong Kong office market recorded net take-up of 2.3 million sq ft, the strongest annual absorption since 2018.
However, overall vacancy temporarily increased due to the completion of new supply. According to JLL, Hong Kong office vacancy rose from 13.2% in December 2024 to 14.1% in December 2025, before easing to 13.4% in February.
In 2026, key office completions — including Lee Gardens Eight in Causeway Bay, Central Crossing and Central Yards — are skewed toward 2H2026. New supply is projected to taper off from 2027 onwards, which could help support a more sustained recovery, adds DBS.
On the rental outlook, DBS expects overall office rents to stabilise in 2026, with performance diverging across districts. Prime districts such as Central are likely to see continued growth in rents, while submarkets may lag.
DBS analysts highlight two stocks that stand to gain in the coming years. Hong Kong-listed Swire Properties gets a “buy” call and a HK$25.60 target price, while Singapore-listed Hongkong Land gets a “buy” call and US$8.64 ($11.17) target price.
“Swire Properties’ long-term earnings and dividend growth, underpinned by expansion of its investment property portfolio, should justify a higher long-term valuation,” writes DBS, “[while] ongoing share buybacks and continued asset recycling initiatives should also support share price performance for Hongkong Land.”
