Pre-committed space and upgrade moves drive the largest quarterly net absorption since 2019

• In Q4 2025, total net absorption reached 1.5 million sq ft, rising by 135.9% q-o-q, largely driven by pre-committed space at the newly completed International Gateway Centre (IGC) in West Kowloon, including commitments from UBS and Banco Santander.
• AIA expanded at The Gateway Tower 5 in Tsimshatsui, leasing a full high-zone floor (24,300 sq ft GFA). Migao Group Holdings leased 10,201 sq ft (GFA) at Cheung Kong Center II in Central for expansion, relocating from COFCO Tower in Causeway Bay.

Vacancy rate rises as new supply enters the market

• IGC in West Kowloon, Cyberport 5 in Pokfulam, and Tseung Kwan O Government offices were completed in Q4 2025, bringing 2,659,300 sq ft of NFA to the market. The overall Grade A office vacancy rate expanded to 14.1% as of December.
• Upward pressure is primarily evident in fringe submarkets, while prime areas remain stable, with Central recording flat vacancy q-o-q and Tsimshatsui achieving a 0.5 ppts contraction.

Rental recovery emerges, while capital values remain under pressure

• Overall market rents increased by 0.7% q-o-q in Q4 2025, with diverging performance across submarkets. Central and Tsimshatsui recorded increases of 1.5% and 1.2%, respectively. Meanwhile, rents in Kowloon East dropped by 1.2%.
• Office sales transaction activity remained predominantly driven by end-users, with increased volume as prices nearing support levels following a prolonged correction. Office capital values decline moderated to 0.8% q-o-q in Q4, down from 2.7% in the previous quarter.

Outlook: Rental recovery to concentrate in prime buildings, with broader rebound delayed

• Central and Tsimshatsui are expected to lead the rental rebound, supported by limited availability in prime buildings and accelerating lease negotiations. Demand is further bolstered by new high-specification developments, which are driving tenant upgrades.
• Medium-quality properties are unlikely to see a soon rebound, as the tenant demand remains uneven across sectors. Older assets in fringe submarkets will continue to face downward pressure. Overall rents are projected to decline moderately by 0-5% in 2026.