Core Insights - The Hong Kong office leasing market is showing signs of demand recovery despite structural challenges such as interest rate pressure, weak demand, and oversupply [1][2] - The financial sector's recovery, active property acquisitions by end-users, and government policies driving relocation demand are injecting new momentum into the market, particularly in the prime areas of Central [1][2] Group 1: Market Trends - The report from Savills indicates that medium-sized hedge funds and quantitative funds are actively entering the core areas of Central, leasing spaces of 1,500 to 5,000 square feet, which is driving demand for landmark properties like the International Finance Centre and AIA Financial Centre, maintaining rents at HKD 110-130 per square foot [1] - Secondary locations in Central are seeing rents generally between HKD 40-60 per square foot, creating direct competition with high-quality Grade A properties in Causeway Bay and West Kowloon [1] Group 2: Future Projections - For the fiscal year 2025, several large self-use transactions are expected, with entities like the Hong Kong University of Science and Technology and the Hong Kong Bar Association absorbing over 430,000 square feet, which will help mitigate the ongoing market decline [1] - A new policy allowing commercial buildings to be converted into student dormitories is projected to generate a relocation demand of 845,000 square feet annually, with about half expected to be absorbed by Grade A offices in the area, serving as a new driver for market recovery [1] - Hong Kong regained its position as the global IPO fundraising leader in the first half of the year, raising over HKD 107.1 billion, which is anticipated to create significant opportunities for investment banks and professional service firms, further supporting demand for core area office spaces [2] - If the financial sector continues to recover, the annual absorption of office space in Hong Kong is expected to return to pre-pandemic levels of 1.3 million square feet, with an additional 400,000 square feet from user acquisitions and another 400,000 square feet from relocation demand, leading to a total annual absorption of 2.1 million square feet [2] - Under optimistic scenarios, the vacancy rate is projected to peak at 16% by 2026, gradually declining to 6% by 2030, which may trigger a rebound in office rents [2]