Core Insights - The Hong Kong commercial real estate market is experiencing a dramatic shift, with tech giants like Alibaba and Ant Group investing heavily while traditional real estate players like Dahonghui are selling off assets, reflecting contrasting market sentiments [2][9][12] Market Performance - The third quarter of 2025 marked the strongest performance for Hong Kong's office market in seven years, with a net absorption of 691,800 square feet, the highest since Q3 2018 [2] - All major commercial districts recorded positive net absorption for the first time since Q2 2015, indicating a robust recovery [2] Vacancy Rates - The overall vacancy rate for Grade A office spaces improved to 17.1% by the end of September, a quarterly decline of 0.3 percentage points, the largest drop since Q3 2018 [3] - Despite high vacancy levels, the market is showing signs of recovery, with new leasing activity reaching 3.3 million square feet, comparable to 2019 levels [3] Demand Drivers - The resurgence in the office market is driven by a booming IPO market and the rise of the wealth management sector, with banks and multinational companies accelerating their office space negotiations [4][5] - Over 70 companies have successfully listed on the Hong Kong Stock Exchange this year, raising over HKD 189.3 billion, contributing to increased demand for office space [5] Rental Trends - Core areas like Central are seeing strong demand for premium office spaces, with a net absorption of 138,000 square feet in Q3, the highest in a decade, while vacancy rates are declining [6][7] - Rental prices in Central have remained relatively stable, with only a slight decline of 0.3%, contrasting with an overall market decline of 0.8% [6][7] New Market Participants - Mainland companies are emerging as significant players in the Hong Kong office market, with Alibaba and Ant Group's acquisition of a major property in Causeway Bay being a notable example [9][10] - Demand from mainland clients for Grade A office spaces, particularly in core areas, is strong and growing [10] Market Challenges - Despite new entrants, the overall recovery of the market is expected to take time, with a projected increase in office occupancy rates by 2027-2028 due to a significant reduction in new supply [11] - The current market faces challenges such as oversupply, with a vacancy rate of approximately 19% and a substantial new supply of 3.3 million square feet this year [12]