How Hong Kong’s headquarters economy fuels rebound in commercial property

Hong Kong’s so-called headquarters economy, in which the city serves as a regional and global base for corporate headquarters, is spurring recovery in the commercial real estate sector as analysts forecast an improved investment environment this year. The city’s battered office market showed signs of stability in 2025, with 2.1 million sq ft (195,000 square metres) of net absorption for the full year, the largest annual total since 2018, according to CBRE. Central recorded the biggest improvement with 234,800 sq ft of net absorption in the fourth quarter, its highest since the second quarter of 2015. The full-year figure reached 496,000 sq ft, the strongest annual total since 2007, CBRE added. Alongside the pickup in leasing, overall office rents fell 2.9 per cent year on year, the smallest annual decline since 2019, the property consultancy added. The improved demand for office space coincided with a record 1.56 million locally registered companies by the end of last year, up 96,609 from 2024. Of these, 195,343 were newly registered or redomiciled firms, while 15,586 were new non-Hong Kong companies setting up in the city. “The [headquarters economy] reinforces demand for premium office space, especially well-located, high-quality buildings that support regional management, capital markets and professional services functions,” said Eric Tsang, acting head of valuation and advisory services at Colliers. “This has helped stabilise leasing across the office market and created renewed interest in prime and quality office assets, even as the broader office sector continues to adjust.” The Hong Kong stock exchange was the world’s most active for initial public offerings last year, with 114 listings raising US$37.2 billion. That trend is expected to continue, with more than 450 companies already bidding to make their market debut. Besides offices, the headquarters economy “is also supportive of prime retail in core districts, as higher-quality employment clusters drive weekday spending and strengthen premium retail catchments,” said Christine Li, head of research for Asia-Pacific at Knight Frank. Retail likewise improved in 2025, growing 1 per cent following a 7.3 per cent decline the year before. Colliers said it expected high-street rents to rise 5 per cent this year, following a 2.9 per cent gain last year, supported by a 3 per cent increase in overall retail sales. These factors are boosting the investment prospects. “We expect a more investible market environment this year than last, underpinned by improving price discovery, a growing pool of motivated sellers, and more pragmatic underwriting assumptions from buyers,” Li said. “By contrast, 2025 was largely a ‘wait-and-see’ deployment year. Capital was present, but often contingent on clearer interest-rate direction, sharper repricing, or exceptionally strong asset quality. “This year, we expect more actionable mandates and a wider bid set, even as investors remain disciplined on pricing.” For specific segments, Knight Frank picked premium office spaces, logistics, modern industrial assets and the living sector to attract the most capital. Colliers expected capital rates in the office and retail segments to “remain broadly stable” after recent price adjustments. “For prime assets, Hong Kong continues to trade at relatively low yields compared with most regional markets, supported by its role as a financial gateway and improving investor confidence,” Tsang said. “Overall, easing interest rates across the region help stabilise pricing and support selective investment activity in cities including Hong Kong.” Not all property assets are likely to benefit from the anticipated upswing in investment as well as leasing activities. “Secondary buildings that do not meet occupier requirements around sustainability, workplace quality and operational efficiency are more likely to face accelerated repositioning or change-of-use pressures rather than rental uplift,” Li said. “We view the headquarters economy as a quality-led tailwind rather than a blanket uplift for the property market. “It underpins demand for premium, well-connected and amenity-rich space, particularly as financial market activity improves and occupiers re-emphasise the value of proximity to capital, clients and talent.”