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]. 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 [3]. - All major commercial districts recorded positive net absorption for the first time since Q2 2015, indicating a robust recovery [3]. - The overall vacancy rate for Grade A office spaces improved to 17.1%, a decrease of 0.3 percentage points, marking the largest quarterly decline since Q3 2018 [3]. Rental Trends - Despite high vacancy rates, rental prices have dropped significantly, with current office rents down 43% compared to Q1 and Q2 2019, prompting companies to consider expansion or relocation [3]. - In Central, the net absorption reached 138,000 square feet, the highest quarterly figure in a decade, with a slight rental decline of 0.3%, outperforming the overall market [6][7]. Demand Drivers - The resurgence in the office market is driven by a booming IPO market and the growth of the wealth management sector, with banks and multinational companies leading the demand for office space [4][5]. - Over 70 companies have successfully listed on the Hong Kong Stock Exchange this year, raising over HKD 189.3 billion, which has bolstered confidence in the market [5]. Emerging Trends - New players, particularly mainland Chinese companies, are becoming significant contributors to the Hong Kong office market, as evidenced by Alibaba and Ant Group's acquisition of a major property for HKD 7.2 billion [9][10]. - The demand for Grade A office spaces from mainland enterprises is notably strong, especially in core areas like Central [10]. Market Challenges - Despite the positive trends, the overall market recovery is still uncertain, with a projected decrease in new office supply in 2026, which may lead to a gradual increase in occupancy rates by 2027-2028 [10][11]. - The current rental yield for Hong Kong offices is around 4%, which is less attractive compared to the 10-year U.S. Treasury yield of approximately 4.08%, making it less appealing for risk-averse investors [11]. Conclusion - The Hong Kong commercial real estate market is navigating a complex landscape of recovery, characterized by a dichotomy between new economic players and traditional investors, each making strategic decisions based on their unique perspectives [12].