Savills’ latest Hong Kong Office Leasing Market Report indicates that Hong Kong’s Grade A office market continued to improve in the second quarter of 2026, with overall rents increasing by 1.3% QoQ and the overall vacancy rate declining from 15.2% to 14.8%. However, the recovery remains highly selective, concentrated primarily in premium office buildings in Central and other core districts. Central led the market, with rents rising 4.8% QoQ and vacancy falling to 9.4%. Hedge funds and quantitative funds have emerged as the primary source of new demand in Central, with some occupiers pre-leasing large contiguous floors before their headcount expands in order to secure increasingly scarce premium space. By contrast, rents in Kowloon East and Kowloon West continued to decline, highlighting that the recovery has yet to extend across the broader market as occupiers become more discerning about location, building quality and operating efficiency. For details, please read the attached report.
Central leads rental growth as demand for prime office space remains robust Grade A office rents in Central increased by 4.8% QoQ in Q2, while vacancy fell from 10.2% in the first quarter to 9.4%. Central recorded net take-up of 312,000 sq ft in the first half of 2026, reflecting strong occupier demand from financial institutions for premium office space in core locations.
Hedge funds and quantitative funds are securing future expansion space in advance
Some funds have leased large contiguous floors before reaching their target headcount, reserving space for future expansion. This forward-looking leasing activity reflects a FOMO on available space in Central and has created a degree of disconnect between leasing demand and current headcounts.
Tenant concentration in core buildings requires close monitoring Some prime Central office buildings have high exposure to hedge fund and quantitative fund occupiers. Central Yards, LHT Tower, Central Tower, The Henderson and Two IFC have all recorded significant proportions of space occupied by these tenants. Should individual funds downsize or sublet space, vacancy rates in the affected buildings could become more volatile in the short term.
Non-core districts remain under pressure Rents in Kowloon East and Kowloon West declined by 1.4% and 0.9% QoQ, respectively, reflecting continuing structural supply pressure and limited demand. Outside hedge funds, wealth management, insurance and IPO-related sectors, expansion demand from other industries remains subdued.
Slower future supply will support premium assets in core districts Average annual Grade A office supply is projected to be approximately 600,000 sq ft between 2026 and 2032, substantially below the historical annual average of around 2 million sq ft recorded between 1996 and 2025. The sharp slowdown in new supply, particularly in core business districts, will support the medium-term rental performance of premium offices in Central and Tsim Sha Tsui.
Mr. Jack Tong, Director, Research & Consultancy of Savills commented,
“Hong Kong’s Grade A office market is still in a phase of selective recovery, with demand clearly concentrated in quality assets in core business districts such as Central. Hedge funds and quantitative funds are pre-leasing large contiguous floor plates to secure space for future expansion, making them a key driver of recent market activity in Central. With new supply expected to decline significantly in the coming years, alongside the continued growth of high-value sectors including funds, wealth management and cross-border corporate services, rents for quality office space in core districts are expected to see further recovery over the medium term.”
Mr. Ricky Lau, Managing Director, Head of Leasing of Savills said,
“Tenants are becoming increasingly discerning in their office requirements. Beyond rent, they are placing greater emphasis on building quality, transport connectivity, corporate image and flexibility for future expansion. Quality office buildings in Central and Tsim Sha Tsui will continue to benefit from demand from the financial, wealth management and professional services sectors, as well as mainland Chinese companies expanding overseas. Landlords should seize the opportunity presented by the market recovery by optimising floor layouts, enhancing building amenities and offering flexible leasing arrangements to attract quality tenants and reinforce their assets’ competitiveness.”
Mr. William Yiu, Deputy Senior Director, Kowloon Office Leasing of Savills said,
“The Kowloon office market continues to face substantial supply pressure, while tenants are placing greater emphasis on operational efficiency, cost effectiveness and their actual space requirements. As some occupiers continue to seek higher-quality office accommodation at more competitive rents, projects offering strong transport connectivity, comprehensive amenities and flexible floor configurations will be better positioned to attract companies seeking to relocate or upgrade their office space. Landlords will need to respond to market demand with more competitive leasing terms and flexible solutions.”