Cash Buyers Fuel Hong Kong Core Office Recovery, Noncore Struggles
A lack of bank financing is splitting Hong Kong's office market, driving a 78% jump in prime district deals by cash-rich buyers while secondary areas languish with 30% vacancies.
Hong Kong’s office market is undergoing a structural split. Prime central districts are attracting a surge in transaction activity, but secondary locations face severe headwinds. Banks are restricting commercial-property lending, fundamentally reshaping the landscape of who can acquire assets in the city and forcing a reliance on balance sheet strength over leverage.
This credit squeeze has handed an advantage to cash-rich owner-occupiers, who are moving to acquire discounted space in traditional business hubs. Approximately 503 office deals were completed in the first half of the year, marking the highest half-year total since the second half of 2021, according to data from Centaline Commercial.
Grade A offices led this rebound, with transactions surging 78% year on year to 119 deals. The buying is heavily concentrated in top-tier properties within Central and Admiralty. Notable lower-priced transactions at Lippo Centre and The Centre signal that valuations are beginning to stabilise after suffering a roughly 70% decline from their historical peaks.
The influx of buyers has also eased supply pressures in the core. Vacancy rates improved compared to the same period last year, falling to 4.95% in Admiralty and 10.41% in Central in June. The acquirers are predominantly financial firms, educational institutions and religious organisations purchasing space for their own operational use.
"The market has found support at current price levels," said Mark Chan, director of the office department at Centaline Commercial.
For investors and market professionals, the divergence underscores a two-tier risk environment for Hong Kong commercial real estate. Well-capitalised buyers are successfully establishing a price floor for premium assets where yields and long-term utility are clear. However, the refusal of banks to finance purchases in noncore areas leaves those markets highly vulnerable.
Without access to debt, peripheral office districts cannot attract buyers despite steep discounts. Vacancy rates in these secondary locations remain stuck as high as 30%, a figure that suggests a prolonged slump and potential further write-downs for owners of non-prime commercial space.
