Core Insights - The Hong Kong real estate market is showing signs of recovery after a six-year adjustment period, with significant improvements expected in quality office rents and residential prices by Q4 2025 [1][2] - The rental prices for Grade A offices in Central are projected to increase by 0% to 5% by 2026, while small to medium-sized residential prices are also expected to rise by approximately 5% [1][2] Market Supply and Demand - The market has faced challenges due to high inventory levels, with an estimated 101.6 months and 67.4 months needed to absorb the inventory for 2023 and 2024, respectively [1] - By the end of 2025, the inventory absorption period is expected to decrease to an average of about 51.3 months, with private residential supply returning to normal levels by the end of 2026 [1] Rental Trends - The rental market for Grade A offices is anticipated to reach its bottom by 2026, with Central and Tsim Sha Tsui leading the recovery, recording rental increases of 0.5% and 0.2% in the second half of the year [2] - The overall market rental rates may decline by 0% to 5%, with an expected vacancy rate of around 15% despite rising demand [3] Retail Market Dynamics - Retail rents, particularly in premium shopping malls, have been under pressure, with expected declines of 9.1% and 7.7% for premium malls and core street shops, respectively, by 2025 [3] - The retail leasing activity is seeing a rebound, especially in core shopping areas like Causeway Bay and Central, despite some traditional restaurants closing down [3][4] Future Outlook - The rental prices for core street shops are projected to decrease by 0% to 5%, while premium mall rents may drop further by 5% to 10% next year [4]

Core Insights - The Hong Kong office market is showing signs of recovery, with Central Grade A office rents increasing by 0.1% month-on-month in November, marking the first month-on-month growth since May 2022 [1] - UBS reports that the supply of office space in Central is expected to decline between 2026 and 2027, indicating that the Grade A office market in Central is nearing a bottom, which will benefit companies with Grade A office operations in Hong Kong [1] - The recent report from Savills indicates a significant recovery signal in the Hong Kong office market, driven by a booming IPO market and expanding demand from the financial sector, suggesting that rents for quality office spaces in Central may rebound sooner than expected [1] Vacancy Rates and Market Dynamics - As of the end of September, the overall vacancy rate for Grade A offices in Hong Kong was 17.1%, a decrease of 0.3 percentage points, representing the largest quarterly decline since Q3 2018 [2] - The active performance of the Hong Kong stock market has bolstered confidence in its status as an international financial center, prompting financial institutions to accelerate their real estate plans [2] - The office market is expected to exhibit a differentiated pattern, with core areas stabilizing while non-core areas face pressure, indicating that the long-term recovery of the Hong Kong office market relies on improvements in the global economic environment and the pace of new supply absorption [2] Developer Strategies - Local developers have begun to adopt new strategies targeting companies planning to list or expand operations in Hong Kong [2] - Despite the ongoing demand for quality office spaces driven by the finance, wealth management, and professional services sectors, the share of technology companies in the market is significantly increasing [2]

Core Viewpoint - UBS reports indicate that there are more clear signals suggesting a recovery in the Hong Kong office market, particularly in the Central district, with a projected decline in supply from 2026 to 2027 [1] Group 1: Market Recovery - The Grade A office market in Central Hong Kong is nearing a bottom, according to UBS [1] - The recovery in the office market is expected to benefit stocks with Grade A office business in Hong Kong, including Swire Properties, Swire Pacific, Land Lease, Hysan Development, and Henderson Land [1]