Will Hong Kong follow the US Fed's lead in raising interest rates in 2015?

Market outlook is also improving.

It has been noted that Hong Kong may follow the US Federal Reserve in raising interest rates this year.

According to a release from CBRE, however, any interest rate hike in the US is expected to be mild and carefully in sync with the economic recovery.

Meanwhile, the release also noted that non-bank financing activity is looking for opportunities in mature markets such as Hong Kong.

Further, multinational occupiers’ continue to focus on keeping costs in check. This will support demand for decentralized office space in Hong Kong, Singapore and Shanghai and offshoring/BPO facilities in India and the Philippines.

The rental gap between core and decentralized offices may narrow in the medium to long term but the upside may be limited by the large volume of new decentralized space in the pipeline.

Here's more from CBRE:

Demand will be particularly strong among newly-raised private equity real estate funds. Around US$14 billion worth of new funds were formed in 2014, with these groups set to deploy capital over the next one to two years.

At the same time, however, around 50 funds will reach expiration in 2015-2016, meaning that disposal activity will continue.

CBRE projects that the real estate investment volume in Asia Pacific will increase by 5% year-on-year to US$118 billion in 2015, along with rental and capital value growth of approximately 2-4% in the office, retail and industrial sectors.

The mild growth in investment volume is partly due to the lack of investible stock available for sale. Investors will become more flexible by looking at indirect investment opportunities.

Kam-Hung Yu, Senior Managing Director, CBRE Investment Properties, Hong Kong, commented: “Around the region, quantitative easing measures are bringing in ample capital and low finance costs which will continue to support investment demand.

In Hong Kong, economic momentum has increased which will stimulate stronger occupier demand and result in low vacancy risks. Together with the structural supply shortage and lack of fast-track supply replenishment solutions from the Government, Hong Kong will see an improving market outlook favourable for investment in 2015.”