Financial firms anchor sustained leasing demand

• In Q2 2026, total net absorption reached 492,000 sq ft, as leasing demand from the financial sector remained robust and pushed the vacancy rate in Central down to 8.8%.
• On the back of buoyant IPO market, mainland securities houses led take-up, highlighted by CITIC Securities leasing an entire floor of 18,000 sq ft at CITIC Tower in Admiralty in May, while Ping An Securities took up 14,900 sq ft at The Center in Central.

Central leads vacancy compression as fringe submarkets diverge

• The overall Grade A vacancy rate stood at 13.1% in June, easing 1.0 ppts year-to-date as demand for prime space accelerated. Central and Tsimshatsui remained the firmest submarkets, with Central posting the sharpest year-to-date improvement in vacancy at -2.2 ppts.
• Kowloon East stayed the clear outlier at 20.0%, while Hong Kong East saw its vacancy expand by 0.6 ppts to 13.3% over the quarter. No new office buildings were completed in Q2 2026.

Capital values rebound as rental gains broaden

• In June, overall office rent rose 1.7% q-o-q, with Central again the key driver at 3.3%. Rents in Wanchai/Causeway Bay rose 1.4%, suggesting the recovery is beginning to broaden beyond the core.
• Grade A office capital values rose 0.8% q-o-q in Q2 2026, the sector’s first increase since 2021, supported by firmer values in Central and Wanchai/Causeway Bay where leasing momentum was strongest.

Outlook: Central-led recovery broadens as fringe markets stay under pressure

• Demand for Central Grade A space should stay firm through 2026, supported by a strong IPO pipeline and mainland wealth inflows. Central Grade A rents are forecast to rise 10-15% over the year, extending the 7.3% first-half gain, led by the Grade A1 segment.
• Other core submarkets should see rental growth of 0-5%, while Hong Kong East and Kowloon East soften on rising vacancy. Overall Grade A rents are projected to rise 0-5% for the year, with capital values stabilising as end-user demand anchors investment.