High office vacancy rates in Hong Kong push landlords to rethink strategies in 2025

Office landlords in Hong Kong are reassessing their leasing and asset management strategies as the city continues to grapple with persistently high vacancy rates in the commercial property sector. The shift follows another year of sluggish demand, subdued expansion from occupiers, and a growing mismatch between supply and tenant requirements.

At the beginning of 2025, the overall office vacancy rate in Hong Kong stood at approximately 15%, with some districts, such as Kowloon East, seeing vacancies climb above 20%. Central, traditionally the most sought-after office district, has also experienced rising availability, with several Grade A buildings reporting significant unlet space.

Several factors have contributed to the current situation. Hybrid work models adopted during the pandemic have become permanent for many companies, leading to a sustained reduction in space requirements. In parallel, economic uncertainty and cautious business sentiment have limited new leasing activity, especially among international firms.

Landlords are responding by offering more flexible lease terms, enhanced tenant incentives, and investing in refurbishment or repositioning strategies to make older buildings more competitive. Some are converting traditional office floors into co-working environments, while others are introducing lifestyle elements, such as wellness facilities and hospitality-inspired communal areas, to attract and retain tenants.

“There’s an increasing need to adapt existing portfolios to meet changing occupier expectations,” said Raymond Leung, a commercial real estate analyst in Hong Kong. “The era of long leases and fixed configurations is being replaced by demand for agility, better amenities, and smarter layouts.”

Developers are also adjusting future supply pipelines. Several office projects originally slated for completion in 2025 and 2026 are now under review or delayed, as landlords focus on filling existing stock before adding new inventory to the market.

Meanwhile, tenants are taking advantage of market conditions to secure better terms. High-quality office space in previously unaffordable areas is now more accessible, prompting some firms to relocate or upgrade without significantly increasing their rental costs.

Market observers note that the current pressure on landlords is accelerating a broader structural shift in the city’s office sector. “The vacancy issue is not just cyclical – it reflects deeper changes in how and where people work,” said Leung. “Landlords who adapt quickly will be better positioned in the long term.”

Although vacancy levels are expected to remain elevated through much of 2025, analysts anticipate gradual improvement if the economic outlook stabilizes and the city’s business environment becomes more active. Until then, Hong Kong’s office market is likely to remain tenant-friendly, with flexibility and value-added offerings taking priority in leasing decisions.

Source: comp.