The Zhitong Finance App learned that CBRE released a report saying that Hong Kong's commercial real estate market continued to recover in the third quarter of this year, thanks to strong office leasing activities, declining vacancy rates, increased investment market momentum, and continued improvements in the retail market. The office market recorded the strongest year-to-date net absorption since 2018, and investment market turnover has also accelerated markedly. Among them, the education industry's demand for hotels and other living and lodging assets continues to increase, becoming an important driving force for investment activities. Meanwhile, the luxury housing market also maintained steady performance during the quarter. Chen Jinping, head of CBRE's Hong Kong research department, said that although the Hong Kong commercial real estate market still faces uncertain factors such as potential interest rate hikes and stock market fluctuations, the bank expects market sentiment to continue to improve in the last quarter of this year.
In terms of Grade A office buildings, the total leased transaction area in the third quarter reached 1.2 million square feet, a decrease of 6% from quarter to quarter. The cumulative year-on-year rental turnover reached 3.4 million square feet, an increase of 6% year-on-year. Despite the supply of a new Grade A office building in Kowloon East, strong net absorption led the Hong Kong office vacancy rate to drop 0.8 percentage points to 15.5% from quarter to quarter, the biggest quarterly decline since the second quarter of 2015.
The decline in the vacancy rate was supported by rents. Overall office rents rose 3.2% quarterly and recorded growth for four consecutive quarters, leading to a cumulative increase of 6.7% from the beginning of the year to date. Central rents have risen 15.8% year to date. Among them, Central A1 Class Jiaqing rents surged 24.3%, the strongest increase since the fourth quarter of 2010. Rents in other core commercial areas also recorded quarterly and year-to-date increases, while non-core market rents continued to fall.
In terms of stores, leasing activity in core retail areas declined this season after recording strong performance in the second quarter of this year. The second quarter was the third active quarter on record, and rental transaction area fell 22% quarter-on-quarter to 290,000 square feet. Since the beginning of the year, cumulative rental transactions have reached 883,000 square feet, which is equivalent to 77% of the total volume for the whole of last year. The restaurant industry accounts for more than one-third of this season's rental turnover, followed by fitness centers, which mainly rent upstairs, covering a total floor area of about 50,000 square feet. Fashion brand rental activities are mainly concentrated on Hong Kong Island.
The vacancy rate of shops in the main streets of the core area fell 0.5 percentage points to 6% quarterly, the second lowest level since the fourth quarter of 2019. The low vacancy rate supported rents. Retail rents rose 0.9% from quarter to quarter, recording growth for the 17th consecutive quarter, with a cumulative increase of 2.7% from the beginning of the year to date.
In the luxury housing market, luxury property prices have risen 5.3% year to date, and 11.3% higher than the low in March 2025. Among them, demand for high-priced luxury homes continues to be strong. In the first three quarters of this year, the market recorded a total of 197 residential transactions worth over HK$100 million, a year-on-year increase of 109.6%; the total transaction amount reached HK$28.2 billion, an increase of 54.9% year-on-year.
Mainland buyers continued to dominate market activity, accounting for 72% of first-hand residential sales and 68% of second-hand residential sales in the third quarter. At the same time, the limited supply of high-quality residential assets, combined with continued strong demand from mainland buyers, continues to be an important factor supporting the luxury housing market. The bank expects luxury property prices to remain generally stable for the rest of the year.