A slowdown in Hong Kong office leasing reflects caution among multinationals, yet analysts see upside as investors seek stability

Hong Kong’s reputation as a safe haven could be reinforced by the geopolitical shock waves from the US-Israel conflict with Iran, potentially supporting demand for premium office space in its core business districts, according to analysts.

While the city was not insulated from global uncertainty, it could benefit over the medium term as Gulf investors reassessed geographic diversification and sought stable financial hubs, a property agent said.

“In the short term – from late first quarter to early second quarter – US-Iran tensions and surging oil prices have weighed on leasing momentum, with March transactions slowing from a stronger start to the year,” the agent said.

“But over the medium term, as Middle Eastern capital intensifies its search for stable international financial centres with dual renminbi and US dollar connectivity, Hong Kong is poised to emerge as a key destination, supporting structural demand for grade A offices in Central, West Kowloon and Tsim Sha Tsui.”

The property agency recorded 42 office leasing transactions in March, down from 76 in January and 64 in February. The figures track citywide leasing activity, with a focus on premium assets.

Multinational corporations (MNCs) had turned more cautious following strikes on Iran that began on February 28, as rising oil prices lifted operating costs and clouded earnings visibility, the agent said.

“Many MNCs have opted to delay relocations, expansions or long-term lease renewals amid heightened geopolitical uncertainty,” the agent said. “Instead, they are taking a wait-and-see approach.”

MNCs accounted for 51 per cent of Hong Kong’s premium office leasing transactions in 2025, according to another property agency.

Despite the recent slowdown, the agent said heightened geopolitical risk could ultimately strengthen Hong Kong’s appeal as a capital haven and wealth management hub.

“The US–Iran conflict has undermined perceptions of some Middle Eastern cities as secure destinations for global assets, prompting high-net-worth individuals and family offices in the Gulf to look for more stable capital anchoring points,” the agent said. “Private wealth in the region is estimated to exceed US$3 trillion, with around US$70 billion available for global allocation, some of which is now being redirected towards Asia.”

Although there was limited official data capturing these flows, market indicators offered tentative signs, the agent added, pointing to a stable aggregate balance and a decline in one-month Hibor from recent highs.

The one-month Hibor, a key benchmark for mortgage pricing, has eased to 2.24 per cent from 2.41 per cent on February 27, according to the Hong Kong Association of Banks.

Such inflows may not immediately translate into leasing demand, but they suggested a gradual shift that could underpin the office market over time.

“As more Middle Eastern family offices establish a presence in Hong Kong, steady demand is likely to build for premium offices in Central and Tsim Sha Tsui, particularly in clusters serving private banking, legal and professional services,” the agent said.

Hong Kong’s office market has been in a prolonged downturn since mid-2019, when the government’s rental index peaked. Rents have since fallen by more than 21 per cent as of February.

The slump in rents followed a surge in new supply, which coincided with weakening demand after an economic slowdown triggered by the city’s anti-government protests and compounded by the Covid-19 pandemic.

Supply pressures, however, are expected to ease. The agency forecasts average annual completions of about 600,000 sq ft of prime office space between now and 2032, well below the historical average of around 2 million sq ft.

“Periods of global uncertainty tend to reinforce Hong Kong’s role as a ‘safe harbour’ and regional financial hub, particularly for mainland firms expanding offshore,” another agent said.

“This supports ongoing demand for prestige office locations in Central over the mid-to-long term.”

The other property agency expects grade A office rents in Central to rise by about 5 per cent in 2026, with core assets likely to lead the recovery.