Core Insights - The Hong Kong Grade A office market is expected to experience a selective recovery in 2025, with a net absorption of 1.8 million square feet, indicating strong demand for quality office spaces in prime locations [1][3] - The overall vacancy rate reached a historical high of 15.5% in December 2025, but the Central district showed a decrease in vacancy to approximately 11.3%, contrasting with the rising vacancy in Kowloon East at about 24.5% [2][3] Market Dynamics - The demand for prime office spaces is driven by hedge funds, asset and wealth management companies, and quantitative funds, which increased their leased area by approximately 14% year-on-year [2][4] - Major leasing activities include Qube's expansion of approximately 146,000 square feet at the International Finance Centre and a significant fintech company's move into CentralYards with about 223,000 square feet, marking one of the largest leasing transactions in over a decade [2] Rental Trends - Rental prices for prime Grade A offices in Central and Tsim Sha Tsui are projected to rise by 5% to 7% in 2026, while other areas may see a mild rebound of 0% to 3% or face declines of about 5% [3] - The limited new supply of approximately 600,000 square feet annually from 2026 to 2032 is expected to support long-term rental performance in core areas [3] Recovery Drivers - The recovery of the Hong Kong office market is driven by three main factors: the expansion of hedge funds and asset management companies, strong demand from the insurance and private wealth sectors, and an increase in non-local student numbers leading to higher leasing activity from educational institutions [4]