Mainland China’s companies and business executives, the vital lifeblood in sustaining Hong Kong’s commercial and luxury residential real estate, are showing tentative signs of returning to the city, drawn by a spate of stock listings that require them to set up offices locally, analysts said.

The Chinachem Group, which owns and develops high-end apartments, offices and shopping centres in Hong Kong, recently leased one of its luxury flats to a Chinese client for HK$200,000 (US$25,800) a month, according to its executive director Donald Choi, a princely sum even for the world’s most expensive residential property market.

The lease underscores how Hong Kong continues to stake its claim as the door to China, even as the city also finds itself increasingly in the cross hairs of the United States after more than two years of a bruising trade war, and as relations deteriorated to their worst in decades.

As Asia’s third-largest capital market, Hong Kong is where hundreds of mainland Chinese companies go to raise capital, and where thousands of multinational companies locate their regional head offices or the doorstep of the world’s most populous consumer market.

“Most multinational corporations [find it] difficult to imagine giving up a market the size of China, with 1.4 billion [consumers], where the urbanisation rate will continue to expand [to become a] rising population with better affordability,” said Credit Suisse’s vice-president Chen Jianping during a webinar with South China Morning Post.

“Hong Kong will remain as the gateway for foreign companies to capture the potential demand from China. In the medium term, Hong Kong can offer one of the best operation environment to all these companies here.”

The optimism is trickling into the market for commercial offices, where mainland Chinese companies are encouraged by the prospect of greater political stability in the city. Potential tenants are now willing to negotiate for longer leases at better prices, said Chinachem’s Choi.

“Some state-owned enterprises and Chinese companies are coming back,” he said, which would be welcomed by landlords and developers faced with a glut of unfilled office space. “Hong Kong remains one of the highest office rental in the world even factoring in the correction.”

The vacancy rate for commercial offices rose to 5.3 per cent in core Central – the prime location of Hong Kong’s business district, where the stock exchange and global banks are located – as of August, according to data by JLL. Overall office rental fees may fall by as much as 25 per cent this year, according to the international property consultant.

None of the multinational corporations that lease the commercial space from Hong Kong’s Champion Real Estate Investment Trust (Reit) have moved out in the past few months, defying naysayers who predicted an emptying of Hong Kong because of the Chinese legislature’s enactment of the national security law for the city.

“Some firms closed or down-sized just because of the [difficulties of the] general market, or need to cut cost,” said Champion Reit’s chief executive Ada Wong. “The office [sector] in the near term will under some pressure as everyone is figuring what the long-term strategy is for using office space, particularly as more companies adopt work-from-home practises.”

Early this year, Wong said the firm has renewed the lease for one of its biggest tenants, while some smaller firms opt for shorter leases with more flexibility.

Investment in China’s real estate market has gone back to full service in the second quarter, compared with the first three months of the year, as the economy swung back to action with the country’s gradual emergence from Covid-19 lockdowns, said Ellen Ng, managing director and head of China real estate at Warburg Pincus.

Second-quarter investment volume jumped 95 per cent to US$8.4 billion compared with last year, according to data by Real Capital Analytics (RCA).

“We have seen foreign investors are piling into China than other markets across the region,” she said.