Hong Kong's office rental decline is poised to moderate to about 5% in 2026 with a pickup in demand driven by a flight to quality, as seen by UBS, Jane Street, Point72, Alibaba and Ant Group. Yet vacancy will hit a new high with the completion of Sun Hung Kai's new office towers in West Kowloon which will encourage tenants to expand at low rents.
Hong Kong office rents have scope to drop about 5% in 2026, after falling around 7% in 2025. A major driver will be a recent pickup in leasing momentum, particularly in the Central district, given strong IPO activity. Positive net take-up in 3Q reached 430,000 sq ft, including 190,000 sq ft in Central, which was the second-highest level in a decade.
The overall market's vacancy rate was 17.2% in September, slightly below a high of 17.5% in May. A further increase in the vacancy rate to a record high of over 18% could happen by year-end, mainly due to the completion of Sun Hung Kai's International Gateway Centre (IGC). Preleasing progress of new office space is improving on a flight-to quality, potentially denting occupancy rates of older buildings.
Wan Chai and Causeway Bay's office vacancy rate could drop to 11.8%, we calculate, after Alibaba and Ant Group's latest acquisition of 13 floors of Mandarin Oriental's One Causeway Bay as their new headquarters for HK$7.2 billion. Wan Chai and Causeway Bay office vacancy rose to a new high of 14% at the end of 3Q from 10.7% a quarter earlier due to the completion of One Causeway Bay with a total of about 440,000 sq ft of net office space. Alibaba and Ant Group currently occupy nearly 20% of Wharf REIC's Times Square under a lease expiring in 2028.
The positive net takeup of office space in Hong Kong in 3Q2025 lowered vacancy rates in other major sub-markets, except for Island East with vacancy rate rising to 15.4% as the end of 3Q2025 vs. 15% in 2Q2025.
Sun Hung Kai's expanding office cluster in West Kowloon could attract more major tenants to its new buildings in 2026-27. The upcoming relocation of UBS into Sun Hung Kai's IGC atop the High Speed Rail West Kowloon Terminus – from Two IFC in the Central district and One Peking in Tsim Sha Tsui – might spark an increase in West Kowloon leasing demand from wealth managers, family offices and mainland Chinese firms.
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JPMorgan is in talks to lease the entire office space of Artist Square Towers in West Kowloon – with a total gross floor area of 672,000 sq ft – which will be completed in 1H27, Sing Tao reports. This might raise the office vacancy of Hongkong Land and Link REIT. JPMorgan occupies about 200,000 sq ft in Hongkong Land's Chater House in Central district and 280,000 sq ft in Link REIT's Quayside in Kwun Tong.
Some financial services providers could move their offices to West Kowloon due to its proximity to the high-speed railway, a key transit link with mainland China. About 22% of the office space of Sun Hung Kai's IGC has been preleased. UBS will occupy 465,000 sq ft of workspace at IGC, located atop West Kowloon Station by early 2026, taking up one of the four office towers. Banco Santander SA has recently committed to 27,000 sq ft of IGC by relocating from Two IFC in Central. Ping An also plans to occupy three floors at one of IGC's towers.
Sun Hung Kai's ICC had an occupancy rate of 92% as of June, slightly better than its overall Hong Kong office portfolio occupancy rate at 90%
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Major office tenants in Central district could prefer to stay in the district, likely due to shrinking rental gap of Central vs. non-Central districts, according to the latest Hong Kong occupier survey for over 400 tenants across various industries and company sizes by Colliers. This could limit landlords' office-vacancy spike in Central. Tenants in non-Central districts tend to be less sticky to their locations.
Jane Street, a US-based quantitative trading firm, will take up 223,000 sq ft across six floors at Henderson Land's Central waterfront project starting in 2027 by relocating from Hongkong Land's Chater House. Henderson Land also secured Point72 as a tenant, with the global alternative investment firm leasing about 64,000 sq ft at The Henderson for its expansion and relocation, also from Chater House.
Some insurance firms could expand their office space in Hong Kong, particularly in Kowloon, given its proximity to West Kowloon Station and its cross-border high-speed train services which can help them market to mainland Chinese. Among the companies in Colliers' office occupier survey this year, about 36% of insurers said they planned to expand their business, the most among all sectors.
AIA expanded its office by taking up 27,100 sq ft at Airside in Kai Tak in 1H2025, while Sun Life leased 7,100 sq ft at Wharf REIC's The Gateway Tower in Tsim Sha Tsui. Swire Properties has thrown off some vacancy risk in its Island East office portfolio with FWD Group expanding to nearly 100,000 sq ft in Devon House. FWD also signed a new 10-year lease of 330,000 sq ft with the building to be renamed as FWD Tower effective from January 2026.
