Hong Kong's office vacancy rate will rise by 1.9 percentage points this year to 18.9 percent and rents will drop by up to 10 percent year-on-year, led by decentralized submarkets, according to a commercial real estate services and investment firm.

The new office supply in Hong Kong is estimated to increase by nearly 90 percent or 3.2 million square feet year-on-year in 2025, which may cause the vacancy rate to slightly increase and keep rents under pressure, the firm said.

But the banking and financial services sector continued to shore up the office market by renting 1.05 million sq ft last year, compared to 649,000 sq ft a year earlier, benefiting from a series of stimulus measures and increasing initial public offerings in the city, an agent said.

The firm predicts that the sentiment of local office leasing will rise and new leasing volume may see a 6 percent year-on-year growth this year.

Gross new office leasing volume recorded an increase for the third straight year since 2022 and reached more than 4 million sq ft in 2024. However, this was still much lower than the peak in 2018 of around 6.5 million sq ft.

The firm predicts the rents of high street shops will increase by 1 to 5 percent this year and the vacancy rate may stay at a healthy level if tourist traffic improves. It also expects that shopping malls' new supply this year will drop by 6 percent.

Regarding warehouses, the firm says that although trading and logistic tenants are getting more cautious due to the challenging global trade environment, the rise of cross-border e-commerce may indicate a new driving force in the market. Warehouse rents may slightly decrease by no more than 5 percent this year.