Lan Kwai Fong Holdings chairman Allan Zeman expected rents in the area to rise 10 to 15 per cent over the next 12 months.

'As leases are coming up, the market is definitely firmer both in retail and offices, and so you are definitely seeing price increases. There have been some recent sales in retail property even in the Lan Kwai Fong area which were very high,' Mr Zeman said.

Despite property in the area becoming more expensive, analysts report interest in buying and renting in Lan Kwai Fong. But the key problem is supply, as premises rarely become available.

FPDSavills retail director Mark Evans said: 'It is going to be a tight supply for the next year, that's why we can see the rent increasing.

'There's a lot more people looking for space. A lot of these restaurateurs are coming off a bad year last year from Sars, but the rebound seems to have been pretty quick year on year, and they are all looking to gain market share.'

A few new premises are being created with the opening of Lan Kwai Fong Tower at the top of D'Aguilar Street, the lower floors of which will be used for bars and restaurants.

A '60s-themed restaurant, The Cavern, has already opened on the ground floor.

The area around Lan Kwai Fong Tower, which backs on to Wyndham Street, has in the past seen fewer customers than the street of Lan Kwai Fong and the lower end of D'Aguilar Street.

Chartersince Surveyors has leased out a 3,000 square foot unit in Lan Kwai Fong Tower to a bar operator for under $50 per sq ft a month. This is less than half the rent paid by bars and restaurants in more expensive locations in the district, according to Chartersince Surveyors associate director Desmond Poon Chi-ming.

But Mr Poon believes Lan Kwai Fong Tower is likely to draw more customers to the top of D'Aguilar Street and help develop more venues on Wyndham Street, since finding suitable premises in the heart of Lan Kwai Fong remains difficult.

'Operators may have to look around at the surrounding area, such as Wyndham Street, and more distant areas like Hollywood Road,' he said.

Mr Evans agreed, saying that Lan Kwai Fong Tower was likely to lead to the development of more bars along Wyndham Street.

Knutsford Terrace in Tsim Sha Tsui has also been expanding.

The Miramar Group has just launched Knutsford Steps, which leads up to the terrace and houses a string of new bars and restaurants.

Miramar spokeswoman Andrea Leung said Knutsford Steps was 90 per cent occupied following the signing up of a Mediterranean restaurant, which will open next month.

Knutsford Steps differs from Knutsford Terrace in that it is spread over a few indoor floors connected to the Miramar shopping centre. Knutsford Terrace restaurants are at street level and offer al fresco dining.

Miramar is banking on the recent expansion of the entertainment area to attract more people.

'The enlarged Knutsford area can definitely attract more locals and overseas visitors,' Ms Leung said.

Part of the reason was a lack of other clusters of bars and restaurants in Kowloon, she said.

'The restaurants in other dining areas in Kowloon are quite scattered - each of them has only a few restaurants and bars.

'When people mention a dining area in Kowloon, they are always referring to Knutsford Terrace,' she said.

Analysts believe Tsim Sha Tsui has the potential for more bars and restaurants once a series of construction projects is completed, such as that linking Tsim Sha Tsui to the KCR railway.

'That's been the market hardest hit because of all the roadworks that have been going on. So we would say that market has probably got one of the biggest potentials to grow next year,' Mr Evans said.