Core Viewpoint - The Hong Kong office market, particularly in the Central business district, is showing signs of recovery driven by a resurgence in the capital market and IPO activities, despite challenges such as high vacancy rates and new supply [1][2][3]. Group 1: Market Trends - The Hong Kong Exchange's acquisition of a commercial building for HKD 6.3 billion signifies a major transaction in the office market, reflecting confidence in the sector [1]. - Reports indicate that while the office market faces pressure from new supply and high vacancy rates, there are emerging signs of recovery, especially in Central [2][3]. - As of June 2025, Grade A office rents in Central are expected to have dropped nearly 45% from their peak in 2019, making it an attractive option for financial institutions [2]. Group 2: Demand Drivers - The demand for premium office space in Central is primarily driven by financial institutions, particularly as more mainland companies list in Hong Kong, which is expected to boost leasing activity [2][4]. - The first half of the year saw a notable demand from mainland financial, insurance, real estate, and professional services firms for quality office spaces in core business districts [3]. - Smaller tech companies and startups are also entering the market, seeking affordable office spaces ranging from 200 to 500 square feet [3]. Group 3: Future Outlook - The recovery of the Hong Kong capital market is attracting more Western financial institutions to the office market, with several large leasing contracts signed recently [4]. - The IPO market's activity is anticipated to positively influence the demand for office spaces, particularly in Central, with expectations of rental stabilization in the second half of the year [4]. - A differentiated market trend is expected, with core areas stabilizing while non-core areas may continue to face pressure, dependent on global economic conditions and the absorption of new supply [4].