FIRST PACIFIC Davis: The first quarter of the Hong Kong Grade A office market recorded approximately 275,000 square feet of net absorption, with strong recovery momentum in the core areas.

FIRST PACIFIC Davis expressed that the Hong Kong Grade A office market showed partial signs of stability in the first quarter of 2026, with overall rents stabilizing and the vacancy rate in the core business district (CBD) improving. Despite challenges from global geopolitical factors, the market is benefiting from limited core supply, a revival in the IPO market, and stable financial demand, with the market focus gradually returning to core high-quality properties. In the first quarter, Hong Kong recorded a net absorption of approximately 275,000 square feet, with a high concentration in key areas such as Central, Wan Chai/Causeway Bay, and Tsim Sha Tsui. Looking ahead, with new supply slowing down, it is expected that rents for prime assets along Victoria Harbour will receive strong support, further consolidating Hong Kong's position as an international financial center. The bank stated that the recovery trend in the first quarter was uneven. Net absorption during the quarter was almost entirely driven by the core areas, with Central recording an absorption of approximately 173,000 square feet, while Wan Chai/Causeway Bay and Tsim Sha Tsui recorded 84,000 and 56,000 square feet respectively. In contrast, most non-core markets continued to experience negative absorption, reflecting tenants' preference to upgrade to properties in core locations with more competitive rents in a downward cycle. The bank further pointed out the significant impact of emerging financial hubs. In addition to Central remaining a top financial and asset management center, Tsim Sha Tsui and the West Kowloon area are rapidly emerging as new financial hubs. With J.P. Morgan leasing approximately 250,000 square feet in the West Kowloon Art Park building, and AXA moving into the International Commerce Centre (ICC), large enterprises are taking full advantage of superior railway connections and cultural facilities to solidify the area's status as a commercial landmark. The overall Grade A office vacancy rate in Hong Kong in the first quarter of 2026 slightly decreased to 15.2%. With future new supply slowing down and limited availability of space in the core business districts, the market supply-demand structure will gradually tighten, providing strong support for rent growth in high-quality offices in areas such as Central and Tsim Sha Tsui. It is predicted that rents for relevant properties will increase by 5% to 7% for the whole year. Director of Research and Consulting of FIRST PACIFIC Davis, Tang Zhuoxuan, stated that although there is still uncertainty in the macroeconomic environment, the Hong Kong office market is transitioning from widespread weakness in the past to local stability. The core business district, with its transportation hub advantages and top-notch asset quality, is leading the recovery, especially in areas like Central and West Kowloon, which are continuously gaining favor from global financial institutions. The Managing Director and Head of Leasing Department in Hong Kong, Liu Weiji, mentioned that corporate relocation and expansion strategies have become more cautious, which has in turn driven the trend of "quality upgrading" in the market. Tenants are actively taking advantage of current rent levels to upgrade from non-core locations to core high-quality office spaces, not only to lock in future operating costs but also to maintain core competitiveness in international hubs.