Stronger demand has reduced grade-A vacancy rates in Central to a four-year low of 9.6 per cent

Office rents in Hong Kong’s Central district are expected to rise faster in the second quarter of the year, according to analysts, a reversal of a multi-year slump that began in the second half of 2019.

The latest forecast was made by US bank Citi, which said premium offices in the city’s main business zone had seen rents rise 1.7 per cent from a trough in October, with room for further increments between the second half this year and 2027.

“Lease negotiation dynamics had started to favour landlords since the fourth quarter of 2025 and strengthening into 2026,” Citi property analysts Griffin Chan and Cindy Li said in a report released on Wednesday.

The rental improvements would be spurred by broader capital inflows into Hong Kong, capital market activity and overseas expansion of Chinese corporates, they said.

Stronger demand has reduced grade-A vacancy rates in Central to a four-year low of 9.6 per cent.

Central is not alone in logging gains, with Admiralty absorbing demand outflow from the city’s main business district, while West Kowloon has also seen robust take-ups in rents.

JPMorgan Chase and Banco Santander were among the latest clients attracted to West Kowloon. In March, JPMorgan committed to leasing about 250,000 sq ft for 10 years at Artist Square Towers (AST), making it the anchor tenant of the 700,000 sq ft mixed-use development by Sun Hung Kai Properties (SHKP).

AST will house the bank’s Kowloon office, which is currently located at The Quayside in Kowloon East, starting in the latter half of 2028. It plans to keep its main office in Central.

Last month, Banco Santander became the first tenant to move into the International Gateway Centre , another SHKP property. The bank occupies an entire floor in one of the towers, spanning about 37,000 sq ft.

Citi’s forecast is the latest upgrade for Hong Kong’s struggling office property market. Morgan Stanley last week raised its forecast for rents in premium Central offices. It now sees a 5 per cent increase this year, up from its earlier estimate of 3 per cent, on the back of “continuing flight to-quality demands and a reviving capital market”.

In March, vacancies in Hong Kong’s premium office market edged up to 13.5 per cent from 13.4 per cent a month earlier, while the vacancy rate in Kowloon East increased to 20.4 per cent from 19.5 per cent, according to data compiled by a property consultancy. Meanwhile, Central, Hong Kong East and Tsim Sha Tsui recorded lower vacancy rates, the data showed.

Central’s empty prime office spaces fell 0.3 percentage points to 9.6 per cent, while Tsim Sha Tsui’s edged down from 7 per cent to 6.8 per cent.

“Office leasing demand continues to concentrate in core business districts, driven primarily by financial institutions,” a property agent saidsaid. “Leasing demand from other sectors has yet to recover, leaving noncore business areas under sustained pressure. We expect this dynamic to persist in the near term,” the agent added.