Hong Kong Office Recovery Holds Despite Proprietary Funds’ Tax-Break Exclusion; Central Rents Rebound 9%: J.P. Morgan
J.P.
J.P. Morgan said the Hong Kong government has clarified that proprietary capital will not qualify for tax incentives. However, the proposed carried-interest tax regime, which would apply a 0% tax rate, is still expected to expand to more qualifying asset managers, including non-proprietary hedge funds and family offices. The report said this would support the recovery of the Central office market.
Central Grade A office rents have rebounded 9% from their trough in the third quarter of 2025. J.P. Morgan expects rents to maintain mid-single-digit growth in the second half of 2026.
Assuming the tax incentives lead to the establishment of 300 companies in Hong Kong, with an average of 2,000 square feet per company, the resulting 600,000 square feet of gross floor area would equal 35% of Hong Kong’s net office absorption in 2026. On a pro forma basis, the overall Grade A office vacancy rate could decline from 13.1% to 12.5%, while Central’s vacancy rate could fall from 8.8% to 7.3%.
The report identified Hongkong Land, which has 44% of its gross asset value exposed to central business district offices, as a key beneficiary. Other beneficiaries include Swire Properties, with 14% exposure, and Henderson Land Development, with 21% exposure.
J.P. Morgan’s conclusion was that the exclusion of proprietary capital from the tax incentives would not alter the recovery trend in Hong Kong offices. Central rents have already rebounded from their trough, and expansion by asset managers is expected to continue supporting leasing demand.
The report characterized the outlook as positive for Hongkong Land, which has the largest CBD office exposure; Swire Properties, including Pacific Place; and Henderson Land Development, including IFC and The Henderson. The 9% rebound in Central rents is already partly reflected in valuations, but the additional demand from 300 newly established companies is not yet fully priced in if the bill is passed.
Key catalysts are the timing of the resumption of second-reading debate on the 2026 Inland Revenue (Amendment) Bill in the Legislative Council, targeted for the second half of 2026; the actual number of newly established fund-management companies; and monthly data on Central office rents and vacancy rates.
Central Grade A office rents have rebounded 9% from their trough in the third quarter of 2025. J.P. Morgan expects rents to maintain mid-single-digit growth in the second half of 2026.
Assuming the tax incentives lead to the establishment of 300 companies in Hong Kong, with an average of 2,000 square feet per company, the resulting 600,000 square feet of gross floor area would equal 35% of Hong Kong’s net office absorption in 2026. On a pro forma basis, the overall Grade A office vacancy rate could decline from 13.1% to 12.5%, while Central’s vacancy rate could fall from 8.8% to 7.3%.
The report identified Hongkong Land, which has 44% of its gross asset value exposed to central business district offices, as a key beneficiary. Other beneficiaries include Swire Properties, with 14% exposure, and Henderson Land Development, with 21% exposure.
J.P. Morgan’s conclusion was that the exclusion of proprietary capital from the tax incentives would not alter the recovery trend in Hong Kong offices. Central rents have already rebounded from their trough, and expansion by asset managers is expected to continue supporting leasing demand.
The report characterized the outlook as positive for Hongkong Land, which has the largest CBD office exposure; Swire Properties, including Pacific Place; and Henderson Land Development, including IFC and The Henderson. The 9% rebound in Central rents is already partly reflected in valuations, but the additional demand from 300 newly established companies is not yet fully priced in if the bill is passed.
Key catalysts are the timing of the resumption of second-reading debate on the 2026 Inland Revenue (Amendment) Bill in the Legislative Council, targeted for the second half of 2026; the actual number of newly established fund-management companies; and monthly data on Central office rents and vacancy rates.