In the first quarter of 2025, Hong Kong's prime office rents experienced a decline, reaching $89.90 per square foot monthly as reported by Knight Frank in their Asia-Pacific Office Highlights report. This decrease coincides with an increasing vacancy rate that has now climbed to 13.6%, reflecting ongoing issues related to excess supply and insufficient demand within the commercial real estate sector. As landlords face mounting pressure, tenants are benefiting significantly, particularly those in legal and financial industries who are capitalizing on favorable market conditions to secure advantageous lease agreements.

Amidst these challenges, some notable leasing activities have taken place. For instance, an alternative investment company recently acquired over 55,000 square feet at The Henderson, highlighting continued interest from finance-oriented businesses in premium properties. Legal firms too have shown increased activity due to evolving complexities in areas like cryptocurrency and international regulations.

The report suggests that despite these headwinds, certain sectors continue showing resilience. However, it predicts further rental declines throughout 2025 as new developments enter the market and corporations maintain cautious approaches towards property investments.

Despite these difficulties, Hong Kong's economic foundation remains solid, with projections indicating GDP growth of 2.3% for this year alongside low unemployment rates (3%) and controlled inflation levels (1.7%).

As the city navigates through these turbulent times, its ability to attract high-profile deals amidst rising vacancies demonstrates resilience in key sectors such as finance and law. While future projections indicate sustained downward trends in office rentals, stable macroeconomic indicators provide optimism about long-term prospects for Hong Kong's commercial real estate landscape.