Prime Central Office Rents Show Signs of Stabilization While High Street Retail Rents Record Narrower Decline
- With the support of improving market sentiment and the U.S. Federal Reserve’s rate cut, Hong Kong residential transaction numbers trended upwards in Q3 amid the current consolidation phase. Total residential transactions for the Q3 period reached 16,700 units, up 63% y-o-y, while home prices remained stable throughout the quarter.
- The Grade A office market recorded net absorption of 401,000 sq ft in Q3, the highest level since Q2 2019. Overall office rents declined by 0.8% q-o-q, although Prime Central subdistrict rents posted a modest rise of 0.6% q-o-q.
- The average retail high street vacancy rate in core districts dropped to 8.3% in Q3, with leasing activities most active in Causeway Bay and Mongkok. Overall high street retail rents gradually stabilized within a narrow range of ±1% q-o-q, with the full-year rental change now forecast in a range of -1% to -2% y-o-y.
HONG KONG SAR – Media OutReach Newswire – 8 October 2025 – Global real estate services firm Cushman & Wakefield today held its Hong Kong Property Markets Q3 2025 Review and Outlook press conference. The residential market sustained momentum in the quarter, supported by lower mortgage rates, a buoyant stock market, and developers’ active launches of primary market home sales at competitive prices. Monthly residential transactions exceeded 5,000 units during the quarter, bringing total residential sales in Q3 to 16,700 units. In the Grade A office sector, boosted by a recovery in stock market confidence and initial public offering (IPO) activity, quarterly net absorption and new lease activities remained robust, with the Greater Central district outperforming. Overall office rents remained under pressure due to high availability, but Prime Central subdistrict rents showed early signs of recovery and edged up. As for the retail sector, overall retail sales experienced some stabilization in the first two months of Q3, with an uptick of 2.8% y-o-y through July and August, while the overall year-to-date decline in retail sales narrowed. Average high street vacancy levels in core retail districts fell during the quarter, accompanied by mild q-o-q declines in core area high street rents.
Grade A office leasing market: Leasing demand and momentum accelerated, Prime Central sub-district rents stabilized
Leasing demand in the Hong Kong Grade A office market saw accelerated momentum through Q3 2025, boosted by a recovery in stock market confidence and initial public offerings (IPOs). The total new leased area in Q3 reached 1.13 million sf, pushing the total for the first three quarters of 2025 past 3.37 million sf, surpassing the full-year total for 2024. The overall Hong Kong Grade A office rental level decline narrowed to -0.8% q-o-q in Q3. The Prime Central subdistrict outperformed the overall market to achieve positive rental growth of 0.6% q-o-q. Quarterly net absorption reached 401,000 sq ft, the highest level since Q2 2019 and bringing the overall office availability rate down to 19.2%, despite the addition of 463,000 sf of new supply at the One Causeway Bay property completed in the quarter.
John Siu, Managing Director, Hong Kong, Cushman & Wakefield, said, “The Grade A office market continued to experience active leasing demand in Q3, chiefly due to recovery in the financial sector and IPO activity, in turn driving leasing demand both from upstream and downstream of related industries. As one of the most preferred submarkets for banking and financial institutions, Greater Central accounted for around 30% of the total new leased area in the quarter, supported by new set-up and relocation demand from hedge funds and wealth management firms, and demonstrating the expansion strategies adopted by the high-end financial services industry.
“Notably, the Greater Central office rental level decline narrowed in Q3, with signs of stabilization between August and September. Prime Central subdistrict office rents edged up by 0.6% q-o-q, suggesting a steady recovery in demand for premium office space. We believe that occupancy levels and rental performances between the highest-quality offices and other lower-tier spaces will increasingly diverge. With leasing sentiment in the first three quarters of 2025 demonstrating greater resilience than previously anticipated, we have now revised our full-year 2025 forecast for overall Grade A office rents to decline in a milder range of approximately 4% to 6%.”
Retail leasing market: Retail sector showed signs of stabilization, with the overall average vacancy rate falling and rental level declines narrowing further
Hong Kong’s overall retail sales experienced some stabilization in the first two months of Q3, with an upturn of 2.8% y-o-y through July and August. In August alone, retail sales grew by 3.8% y-o-y, marking the fourth consecutive month of growth and suggesting the beginnings of a turnaround from the previously sluggish performance. The buoyant stock market and the government’s continuous proactive efforts in promoting tourism have provided support to more stable local consumption and growing tourist arrivals, bolstering overall retail market sentiment. The city’s overall retail sales for the January to August 2025 period saw a narrower y-o-y decline of 1.9% to record HK$245.1 billion. Within key retail sectors, the Medicines & Cosmetics; and Food, Alcoholic Beverages & Tobacco sectors continued to record modest growth in the Q3 period, rising by 3.8% and 0.8% y-o-y, respectively.
The overall high street vacancy rate across the four core retail districts fell to 8.3% in Q3 from 9.7% in Q2. Vacancy rates in Causeway Bay and Mongkok dropped to 7.9% and 5.3%, respectively, aided by resilient tourist footfall and attractive rental levels that have attracted entry from diverse retailers. Central and Tsimshatsui rents rose slightly to 10.0% and 10.6%, respectively.
As for high street rental levels, Causeway Bay, Central and Tsimshatsui recorded q-o-q declines within 1%, while Mongkok remained stable, edging up 0.1% q-o-q. Given the sustained leasing momentum in core districts, coupled with landlords’ more pragmatic attitudes, overall high street rents are expected to gradually stabilize. Cushman & Wakefield’s full-year 2025 forecast is now for the overall rental level to decline in the range of 1% to 2%. Regarding F&B rents, fluctuations across districts were within ±1% in Q3, although overall leasing activity in the sector was relatively subdued, suggesting room for negotiation in the near term.
John Siu commented, “Since the full reopening of borders, Hong Kong’s retail market has continued to see first-store leasing activities by brands. During the first nine months of 2025 we have recorded at least 91 non-local brands setting up their first permanent store in Hong Kong, with F&B operators accounting for the largest share, followed by fashion and athleisure brands. Notably, around 60% of these brands chose to set up their first location in the four core districts. As for the origin, 41% are from the Asia-Pacific region, and 39% are from the Chinese mainland, reaffirming Hong Kong as a favored destination for both international and China brands. Zooming in on Causeway Bay, apart from the traditional prime streets of Kai Chiu Road and Russell Street, the adjacent Pak Sha Road, Yun Ping Road and Lan Fong Road have formed a vibrant cluster with new fashion brands and bakeries popular among young consumers and tourists, injecting stable foot traffic and energy into the district and in turn driving leasing demand. We are also pleased to see the government’s push in promoting the “pet economy,” which is expected to help attract a broader customer base and to enhance the overall consumer experience.”
Residential market: Home prices stabilized in Q3 while rents continued to rise
Hong Kong’s residential market extended the momentum seen last quarter through the Q3 period, supported by the buoyant stock market and sustained capital inflows. The total number of residential sales and purchase agreements in Q3 reached approximately 16,700 units, representing a y-o-y increase of 63%. The primary market remained active in the quarter, accounting for over 30% of the July and August total transaction number. Developers actively launched primary market projects at competitive prices and with incentives, prompting a resurgence of homebuyer interest particularly for small-to-medium-sized units. In September, the U.S. Federal Reserve announced a 25-basis-point rate cut, marking its first reduction of the year. Several local banks followed suit by lowering mortgage rates, effectively reducing the entry threshold and financing costs for homebuyers. These factors are expected to further stimulate demand in the residential sector.
Rosanna Tang, Executive Director, Head of Research, Hong Kong, Cushman & Wakefield, added, “Buyer confidence has strengthened with the support of a gradually easing financial environment and rising residential rental yields. This has helped sustain monthly residential transaction numbers above 5,000 units since March this year. Additionally, the U.S. Federal Reserve’s 25-basis-point rate cut in September sent a positive signal to the market, contributing to the housing sector’s gradual stabilization during its consolidation phase. According to the Rating and Valuation Department, the overall residential price index has steadily recovered from its low in March, recording a cumulative increase of 1.3% between March and August. This has narrowed the total price decline in the first eight months of the year to just 0.2%.
“Meanwhile, the residential rental index rose by approximately 3.2%, driven by demand from incoming expats and non-local students, reflecting the resilience of the leasing market. Looking ahead, if the U.S. implements further rate cuts within the year, the HIBOR (Hong Kong dollar interbank rate) is expected to fall further, reducing capital costs and making rental yields more attractive. This could encourage more investors and renters to enter the market, providing positive support to both transaction numbers and property prices. We now forecast the total number of residential transactions for the full-year 2025 to reach 58,000 to 60,000 units, with overall home prices expected to stabilize and potentially strengthen by up to 2% for the year.”
Edgar Lai, Senior Director, Valuation and Consultancy Services, Hong Kong, Cushman & Wakefield, highlighted, “Residential market sentiment continued to strengthen in Q3, particularly in the small-to-mid-sized segment. Our tracking of popular housing estates shows that prices across different market segments recorded growth through the quarter, reflecting a gradual recovery in buyer confidence. Prices at City One Shatin, representing the mass market, rose by 3.8% q-o-q. Taikoo Shing, representing the mid-market, saw a q-o-q increase of 1.9%. Residence Bel-Air, representing the luxury segment, recorded a 1.5% q-o-q rise. Although verbal enquiries from the bank have slightly eased from May, the level has remained relatively high, suggesting sustained market activity. Notably, we have seen some transactions involving tenanted properties. Lower purchase-price units, particularly those at less than the HK$5 million to HK$6 million range, have been sought-after by homebuyers. With ongoing cash rebate offers from banks and market expectations of further rate cuts, transaction activity in this segment is expected to remain strong, as a key driver of the recovery of the overall residential market.”
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Photo 1: (From left to right) Edgar Lai, Senior Director, Valuation and Consultancy Services, Hong Kong, Cushman & Wakefield; John Siu, Managing Director, Hong Kong, Cushman & Wakefield; and, Rosanna Tang, Executive Director, Head of Research, Hong Kong, Cushman & Wakefield.
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