Boston, MA -- (SBWIRE) -- 11/24/2014 -- Hong Kong, as a global financial hub and a gateway to mainland China, has one of the most dynamic commercial real estate markets in the world. Rental rates, particularly for retail, are among the highest in the world, and the market has traditionally been characterised by strong demand and, due to its small size, limited supply. With the market vulnerable to the impact of an economic slowdown in China, the medium-term outlook is one of stability in rental rates.

Hong Kong is a Special Administrative Region (SAR) of the People's Republic of China. It is governed under the principle of 'one country, two systems', which means that it retains many institutions, for example its common law legal system, that date back to its time as a British colony. All this gives a level of predictability to the business environment, although tensions with Beijing over the level of democracy allowed in Hong Kong do arise from time to time, as witnessed in the protests in the latter part of 2014.

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Hong Kong's economy is closely linked to that of China, leaving the SAR particularly exposed to any potential slowdown in the mainland. The main risk to our outlook for the commercial real estate sector is thus a sharper-than-expected slowdown in China. However, other risks are the impact of rate rises in the US, any renewed crisis in the eurozone and, closer to home, any downturn in consumer confidence resulting from a fall in residential real estate prices.

The office market is currently characterised by moderate supply and demand. However, as a global financial hub, Hong Kong's office real estate market is highly developed, and we do expect demand to continue to meet the space available, with particular interest from international and mainland Chinese firms. Demand for premium space in the central business district will be the key driver of the office market, although we are also noting a trend of increasing development in more suburban areas.

Hong Kong's retail market is one...

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