Conclusion First: The Hong Kong office market is not experiencing a "comprehensive recovery," but rather entering a differentiated phase of "core stabilization and non-core continued clearance"

If summarizing the Hong Kong office market in 2026 in one sentence, it would be: Premium core assets are beginning to recover absorption, but the overall market is still digesting the high vacancy and supply pressures accumulated over the past few years.

One of the most noteworthy signals in the market is Singapore-listed REIT Mapletree Pan Asia Commercial Trust announcing in December 2025 the sale of the Hong Kong Festival Walk Tower office building, with a transaction price of approximately $252 million. This move is not just a single asset transaction; it resembles a capital market signal: institutional investors are reassessing the returns, liquidity, and future capital expenditure pressures of Hong Kong office assets.

Meanwhile, there are highlights in the Hong Kong office leasing sector. Market dynamics released by JLL in January and February 2026 show that the Hong Kong Grade A office market has achieved positive absorption for multiple consecutive months, with Central vacancy rates dropping to their lowest levels since 2023, and overall office rents slightly rising in January 2026. However, on the other hand, the overall available space in the market remains high. Colliers mentioned in its response to the 2026 fiscal budget that the Hong Kong Grade A office vacancy rate is still around 17.5%, with available space close to 15 million square feet.

Therefore, when discussing Hong Kong office investment in 2026, the core question is no longer "whether to buy Hong Kong office properties," but rather: What to buy, where to buy, under what return assumptions to buy, and whether one has the patience for asset renovation and holding.

I. Market Status: Leasing-side improvements, but not equivalent to a comprehensive reversal

From the leasing market perspective, Hong Kong offices have shown more positive marginal changes compared to 2023–2024.

1) Premium offices in core areas recover first

JLL noted in its January 2026 monthly report that the Hong Kong Grade A office market recorded approximately 537,000 square feet of positive absorption in December 2025, marking the ninth consecutive month of expansion. By the February 2026 monthly report, JLL further mentioned that Central's Grade A office vacancy rate had dropped to its lowest level since 2023, with overall office rents rising 0.3% month-on-month in January 2026.

This indicates that what is truly recovering first is not the entire market, but Central and some premium assets. The underlying logic is typical "Flight-to-Quality": in an environment where overall demand remains cautious, tenants are more willing to allocate limited budgets to more core, higher-quality, better-located, and better-equipped buildings.

2) The overall market is still suppressed by high vacancy

However, shifting the perspective from Central to the entire Hong Kong reveals another side. Colliers pointed out in its response to the 2026 Hong Kong budget that, despite some recovery in leasing activity in 2025, the overall vacancy rate for Hong Kong Grade A offices remains around 17.5%, with available space close to 15 million square feet. In other words, the entire market is still in a phase of high supply digestion.

3) What does this mean?

This means that the 2026 office market is better assessed through "layered judgment" rather than "directional judgment":

• Core CBD, premium Grade A: Beginning to recover rents and absorption
• Non-core, secondary buildings, older offices: Still facing longer clearance cycles and greater bargaining pressure

For AIAIG in writing, it is most appropriate to emphasize not "Hong Kong office recovery," but "Hong Kong office entering a two-speed market."

II. What does Mapletree's sale of Hong Kong office buildings mean?—Understanding institutional capital's real judgment from a single transaction

1) The symbolic significance of this transaction

In December 2025, Mapletree Pan Asia Commercial Trust announced the sale of Festival Walk Tower, with a price consistent with its latest independent valuation, and the transaction is expected to be completed in February 2026. Given Mapletree's background with Singapore state capital, this transaction is widely viewed by the market as an important signal: Even long-term institutional holders are actively adjusting their exposure to Hong Kong offices.

2) Why sell?

From a capital allocation logic perspective, REITs selling Hong Kong office assets may typically be due to the following reasons:

• Locking in or releasing capital for markets and assets with higher certainty
• Reducing exposure to long-term vacancy and rental fluctuations in Hong Kong offices
• Adopting more conservative duration management regarding refinancing and capital expenditure pressures

3) Its implications for investors

What AIAIG readers should understand most from this transaction is not "Hong Kong offices cannot be bought," but rather:

• Institutions are distinguishing between "offices that can be held" and "offices that should be exited";
• Future returns depend more on asset management, tenant quality, building grade, and location, rather than simply waiting for market recovery;
• Capital will lean more toward "consensus assets," i.e., buildings that are easier to lease, finance, and exit.

Therefore, the new strategy for the Hong Kong office market is not "buying all offices at the bottom," but conducting asset screening and portfolio restructuring.

III. New Strategy for Hong Kong Office Investment Portfolio in 2026: Shifting from "Betting on a Rebound" to "Selecting Structure"

In 2026, Hong Kong office investments are more suitable for allocation according to a three-tier structure.

First Tier: Core CBD Premium Offices as the Base Position

Assets suitable for inclusion in the base position generally meet the following conditions:

• Located in Central or other core areas
• Grade A or with high-standard upgrade potential
• Strong tenant structure, with high proportions of financial, professional services, and regional headquarters tenants
• High liquidity, with clear exit paths in the future

The logic for such assets is not high volatility, but "relatively the most stable."

Second Tier: Value-Repair Offices That Can Be Renovated and Re-leased

These assets may not be the most core, but have the potential to increase rents and occupancy through upgrades, repositioning, and improving building systems. Key considerations include:

• Whether CapEx is controllable
• Whether the renovation can meet the requirements of new-generation tenants for energy efficiency, flexible office space, transportation, and amenities
• Whether there is genuine office demand in the surrounding area, rather than relying solely on low prices to attract tenants

Third Tier: Exercise Extreme Caution with High-Vacancy Secondary Offices

For older, poorly located, weak-tenant, and future-heavy-renovation office buildings, the investment logic in 2026 is not "cheap is fine," but to consider:

• Vacancy periods may be prolonged
• Rent recovery may not be sufficient to cover capital expenditures
• Refinancing environments may not remain consistently favorable
• The buyer pool upon sale may be narrow

In other words, the Hong Kong office market in 2026 is not suitable for "bottom-fishing across the entire market," but rather for "only buying assets with clear repair paths and exit logic."

4. AIAIG's Recommended "Office Asset Health Check Form": 6 Criteria to Determine if a Hong Kong Office Building is Worth Buying

If you want to further develop this article into tool-based content, it is recommended to add a fixed module:

1) Location and Building Grade

• Is it located in the core CBD
• Is the building age too high
• Do transportation and commercial amenities support tenant upgrades

2) Tenant Structure

• Is the concentration of single tenants too high
• Is the industry counter-cyclical
• Are lease expirations too concentrated

3) Real Effective Rent

• Do not just look at nominal rent; consider the actual rent after factoring in rent-free periods, fit-out subsidies, commissions, and other incentives

4) Vacancy and Absorption Capacity

• Is it short-term vacancy or long-term unrented
• Have there been real new leases in the past 12 months to support it

5) Future CapEx Pressure

• Do elevators, air conditioning, facades, common areas, and energy efficiency systems require significant updates

6) Financing and Exit

• Are banks willing to lend
• Is the capitalization rate reasonable
• Is the future buyer pool deep enough

If AIAIG turns these 6 criteria into a template, it can be reused when writing about the office markets in Hong Kong, Singapore, and Tokyo in the future.

5. The Most Worth-Tracking Follow-up Variables: What to Watch for in the Next Phase of Hong Kong's Office Market?

For the subsequent trends in 2026, the most worth continuously tracking are not "market sentiment," but the following variables:

1. Whether the rental gap between Central and non-Central continues to widen—this will verify if the core rebound is sustainable.
2. Absorption rate of new supply—whether high vacancy can be naturally absorbed determines the length of the market adjustment cycle.
3. Whether more institutions continue to sell Hong Kong office assets—this will directly affect capitalization rates and market pricing.
4. Whether financial and China-related leasing activities persist—currently, the improvement in core area absorption is largely related to the activity of financial tenants.
5. Building renovation and use conversion policies—if more old offices are converted to other uses, the supply pressure in the office market may be substantially alleviated.

Therefore, the most professional approach is not to say "Has the Hong Kong office market bottomed out?" but to say:

The Hong Kong office market is transitioning from a phase of 'universal decline' to one of 'differentiated recovery,' where the pricing logic for core assets and non-core assets will increasingly diverge.