- Residential market sentiment turned more cautious in Q3, with total residential transaction numbers slipping by 40% q-o-q and 21% y-o-y to record around 13,240 cases. Home prices softened by 0.8% between July and August, yet, supported by stronger 1H performance, still recorded a cumulative rise of 7% in the first eight months of 2026.
- Grade A office market citywide net absorption reached 412,400 sq ft in Q3, mainly driven by expansion activities by the banking, financial services and insurance (BFSI) sector. Rents in Greater Central continued to pick up, while rental level declines in non-core submarkets narrowed. The overall office market rental level is expected to rise by +5% to +7% in 2026.
- Overall retail market sales growth remained resilient on the back of growing tourist arrivals and stronger economic fundamentals supporting local consumption sentiment. The overall high street vacancy rate remained broadly stable in Q3, with leasing activities concentrated in Mongkok and Tsimshatsui.
The Hong Kong residential market entered a consolidation phase in Q3 amid a shift in the U.S. Federal Reserve’s interest rate outlook, increased stock market volatility, and tighter cross-border capital controls in the Chinese mainland. Against this backdrop, residential transaction numbers dropped by 40% q-o-q to record around 13,240 cases in Q3, while home prices declined by 0.8% during July and August.
In the Grade A office market, the total new leased area for Q3 reached 1.4 million sq ft, the highest quarterly level since 2019, supported by expansion activities from the BFSI sector. Citywide net absorption reached +412,400 sq ft for the quarter, bringing the overall availability rate to trend further downward, while YTD rental growth recorded +6.1%.
In the retail sector, total retail sales remained resilient in Q3. The overall high street vacancy rate remained broadly stable during the quarter, chiefly supported by more active leasing commitments in Mongkok. Leasing activity in Hong Kong Island districts moderated somewhat.
Office Market Key Takeaways
- The overall office rental level increased by 1.7% q-o-q in Q3, bringing the YTD growth to 6.1%. Core submarkets continue to outperform, while rental declines moderated in non-core areas.
- Driven by expansion demand from the BFSI sector, citywide net absorption reached 412,400 sq ft in Q3, mainly led by Greater Central and Greater Tsimshatsui.
- Competition remains intense for mid-priced Grade A offices, at net effective rents of HK$45-HK$60 psf, amid abundant options from existing and future supply at this price range.
- Positive market momentum will help to absorb part of the 1.2 million sq ft of new supply in Q4, keeping availability broadly stable at 19%-20% by year-end.
- Full-year rental growth in Greater Central is now projected to be +12% to +14%, supporting the overall Grade A office rental level to rise by 5% to 7% through 2026.
Retail Market Key Takeaways
- Growth in tourist arrivals and resilient local consumption continued to support overall retail sales to pick up moderately in Q3.
- Leasing activities focused on Mongkok, while vacancy rates on Hong Kong Island rose moderately, while F&B rents across districts remained under pressure amid high availability.
- First-store demand is broadening beyond the Chinese mainland with Japanese, South Korean and Thai brands accounting for 36% of first-stores in Q1–Q3 2026, up from the 29% in 2025.
- We now forecast high street retail rents to record low-single digit annual increases across districts, with F&B rents set to maintain a downward trend.
- A stronger RMB and a series of upcoming mega-events are expected to provide key support for tourist spending in the coming months.
Residential Market Key Takeaways
- Following the release of purchasing power over the past year, the change in interest rate direction and tightened mainland capital controls prompted some buyers to return to a wait-and-see stance.
- Residential sales in Q3 slowed to around 13,240 units, down 40% q-o-q and 21% y-o-y.
- According to Cushman & Wakefield data, overall mass market home prices in Q3 dipped by 0.1% q-o-q, bringing year-to-date home prices to record 7.7% growth.
- Residential transaction numbers are expected to slow in Q4, bringing the full-year 2026 total to a range of 67,000 to 68,000 units.
- If interest rates rise again in Q4, home prices are likely to continue to consolidate in the short-term, bringing full-year 2026 home prices to fluctuate in a narrow range close to +7%.
