JLL: Hong Kong property market finally sees a glimmer of turnaround, prices expected to rise by up to 5% next year.

Jones Lang LaSalle (JLL) published a report stating that after a six-year adjustment period starting from the end of 2019, the Hong Kong property market is finally showing signs of a turnaround, with prime office rents and residential property prices significantly rebounding in the fourth quarter of 2025. Jones Lang LaSalle (JLL) expects a 0% to 5% increase in Grade A office rents in Central and residential prices for small to medium-sized properties by 2026. The report notes that the market has been facing challenges of high inventory in recent years. Based on supply calculations for 2023 and 2024, the market would need approximately 101.6 months and 67.4 months, respectively, to absorb all inventory. As the remaining units are gradually absorbed, it is expected that by the end of 2025, the inventory absorption period will fall to an average level of around 51.3 months from 2015 to 2021. At the same time, by the end of 2026, private residential supply is expected to return to normal levels, with the time to clear remaining inventory further shortened to around 44.7 months. Jones Lang LaSalle (JLL) Chairman in Hong Kong, Denis Ma, stated that property prices in Hong Kong have bottomed out this year, and he holds a cautiously optimistic view for the outlook in 2026, with expectations of a 5% increase in residential prices for small to medium-sized properties. Luxury property prices are expected to remain stable, but rents could increase by 0% to 5%. He pointed out that prices of new developments and newer residential properties would see more significant increases. Sales of new properties are expected to remain robust, helping to boost the overall market sentiment and drive property prices upward in Hong Kong. Recent reductions in prime interest rates by banks and expectations of further rate cuts could help further ease mortgage burdens, leading to a gradual release of pent-up residential demand and an expected increase in transaction volumes. However, he also cautioned that uncertainties in the macroeconomic environment, combined with continued weakness in the commercial property market and rising unemployment rates, could pose challenges for the residential market next year. Jones Lang LaSalle (JLL) stated that after a six-year correction period starting from the second half of 2019, the Grade A office leasing market in Hong Kong is expected to bottom out in 2026. Central and Tsim Sha Tsui are expected to lead the rebound, with rental increases of 0.5% and 0.2%, respectively, in the second half of the year. Net absorption reached 1.63 million square feet in the second half of this year, the highest level since the first half of 2019, reflecting that businesses are no longer just focused on consolidating space but are also starting to expand again. The market recovery is mainly driven by strong demand from hedge funds, private banks, and wealth management centers, with the number of bank deposits and licensed securities professionals hitting historical highs this year. The Director of the Commercial Department of Jones Lang LaSalle (JLL) on Hong Kong Island, Samuel Kwok, stated that looking ahead to 2026, the market performance is expected to show a divergence, confirming the idea that "offices are no longer a single market, but are made up of multiple niche markets." The recovery momentum is expected to mainly come from financial service institutions, with the Central office market benefiting the most. Jones Lang LaSalle (JLL) expects rents in Central to increase by 0% to 5%, while the overall market rents may fall by another 0% to 5%. Despite a rebound in demand, the overall vacancy rate is expected to remain at around 15% due to ongoing significant supply. With the slowdown in rental declines, the market seems to be at or near the bottom, presenting a favorable opportunity for tenants to secure long-term leases. Jones Lang LaSalle (JLL) indicated that retail rents have been under pressure this year, with prime shopping malls performing the weakest and vacancy rates remaining high. Rents for prime shopping malls and street shops in core areas are expected to decrease by 9.1% and 7.7%, respectively, in 2025, though the vacancy rate for street shops in core areas has slightly improved. Lower rents have prompted tenants to upgrade to prime locations and attracted new brands to enter the Hong Kong market at more affordable levels. Overall leasing activities have seen an increase, but transactions are still concentrated in core shopping areas like Causeway Bay and Central. Senior Director of the Retail Department of Jones Lang LaSalle (JLL) in Hong Kong, Winnie Chan, mentioned that while some long-standing restaurants have closed down, demand for upgrades and new brands remains steady. She expects the leasing market to remain active next year, supported by further rental adjustments. Considering weak job prospects and continued imbalances in inbound tourism, the rate of shop closures in 2026 is expected to exceed new leases, keeping vacancy rates at high levels. Chan predicts that retail rents in core areas of Hong Kong will decline by 0% to 5% next year, while rents in prime shopping malls may further decrease by 5% to 10%.