LOWER rental costs and development proposals for Western District have moved Sheung Wan into the spotlight as a commercial area with great market potential, says property consultancy Colliers Jardine. The recent sharp increase in office rentals in core business districts has pushed small to medium-sized companies to the periphery of the central business district (CBD), to areas such as Sheung Wan, North Point and Quarry Bay, where rents are lower. However, there was also great development potential in the western part of Hong Kong island, the firm said. ''In Sheung Wan, there are many old buildings, making the redevelopment potential there enormous,'' said David Hui, associate director of Colliers Jardine's commercial leasing department. ''In addition, new commercial buildings constructed there have great capital appreciation potential.'' The new airport and the Western Harbour Tunnel would make Sheung Wan the new commercial focus on Hong Kong island, he said. In the past, the area was favoured by mainland firms, such as the China Merchants' Holding Company. Now, most tenants of Sheung Wan offices were Chinese consortiums, shipping companies, electrical appliance agents, travel agents and companies involved in China trade. However, more companies were being attracted to Sheung Wan because it was close to the Macau Ferry Terminal, loading access for ships and its banking and hotel facilities, he said. More commercial buildings would be built as demand for offices expanded. Average rents in Central were $56 per square foot, compared to $44 in Wan Chai, $42 in Tsim Sha Tsui and $40 in Causeway Bay, he said. This compared to $28 to $32 in Sheung Wan. Mr Hui said the Grade B market would follow the Grade A sales and prices rises after the third quarter.