The Zhitong Finance App learned that Colliers released the “Market Report for the Third Quarter of 2026”, indicating further steady growth in the Hong Kong commercial real estate market during the period. Lee Yuen-yan, head of the bank's Hong Kong research department and retail consultancy, said that demand for high-quality office buildings and education-related assets was particularly prominent during the period. Despite maintaining high financing costs, tenants and investors were actively seeking opportunities with long-term value. The pace of market recovery varies from industry to industry and region, but the market outlook is gradually becoming clear as the absorption of office buildings improves, visitors to Hong Kong grow, and cross-border capital flows back.
In terms of office buildings, the Grade A office rental market further improved during the period. The net absorption volume in Hong Kong reached 1.01 million square feet, recording positive absorption for the sixth consecutive quarter. Tenants related to financial institutions, particularly quantitative trading companies, became the driving force for major leasing transactions at Central and Kowloon stations.
Central and Admiralty continued to outperform the overall market, and the vacancy rate fell to 9.1%, returning to the unit level for the first time in four years. The increase in rents was mainly concentrated in high-quality Grade A commercial buildings. Among them, rents for top Grade A commercial buildings rose 17.1% year to date, while rents in Central and Admiralty rose 9.7%, while overall rent increases of only 0.8% were recorded for Grade A office buildings. In contrast, rents in Kowloon East fell 5.8% year to date.
The bank expects rent increases of more than 10% in Central and Admiralty in 2026. As for the non-core commercial area market, tenants are still dominated, and rents in Kowloon East are expected to drop by more than 5% throughout the year.
In terms of retail stores, the Hong Kong retail market continued to improve in the third quarter, thanks to the continued recovery of the tourism industry. The number of visitors to Hong Kong in August was about 5.5 million, up 6% from the previous year, and hit a monthly high after the pandemic. Personal care brands and mainland educational institutions have become a new source of rental demand in the street store market. Tenants continue to prefer strategic locations and well-equipped stalls that can be put into operation in real time.
Supported by the limited supply of high-quality parking spaces in the core area and the trend towards diversification of the tenant mix, the overall rent for street stores in the core area increased by 1.8% year to date, compared to 2.3% year-on-year. The bank expects street rents in the core area to rise by about 3% throughout 2026.
In terms of industrial properties, the overall industrial property vacancy rate in Hong Kong fell back to 9.9% in the third quarter, mainly due to landlords providing more attractive leasing conditions. Warehouse rents fell 0.8% quarterly, and recorded a decline for 11 consecutive quarters, a cumulative correction of 19% from the high level in 2023. Demand for leasing mainly comes from third-party logistics and electronic product-related companies, driven by increased exports of semiconductors and advanced electronic products, while demand from other industries is relatively weak.
The bank expects industrial rents to remain under pressure in 2026, falling by about 8% for the whole year. However, the Hong Kong Government plans to increase Hong Kong's gold storage capacity to more than 2,000 tons and establish a central gold settlement system, which is expected to drive medium- to long-term demand for high-value logistics and specialized storage facilities. In addition, the development of the northern metropolitan area is driving the relocation of brownfield operators, supporting the integration of third-party logistics operations, and driving the demand for leasing logistics hubs with convenient transportation in the region.
In terms of capital markets, the Hong Kong investment market recorded a turnover of HK$10.7 billion in the third quarter, down 23.2% from the previous quarter, but still up 18.5% year on year. The cumulative investment turnover for the first three quarters reached HK$39.8 billion, a sharp increase of 65% over the previous year, and surpassed the full year level of 2025. Education-related assets continue to dominate market demand, with student dormitories and educational facilities transactions accounting for a record 42% of total investment in the third quarter. At the same time, there was also a significant return of overseas capital, with international investors accounting for about 30% of the quarterly turnover, the highest level since the fourth quarter of 2022.
The bank believes that the office market continues to recover and demand for education-related assets continues, but as the pressure on landlords to sell has eased compared to last year, the opportunity to buy high-quality assets at a sharp discount is gradually decreasing. It is expected that overseas investors will continue to actively seek out assets with potential for educational transformation. The bank maintains a forecast of about 10% year-on-year increase in investment turnover for the whole year.