WITH everyone predicting a further decline in commercial rents, interim results of property counters like Great Eagle Holdings will have the pundits pouring over their books attempting to forecast the fortunes of the property market. The fact that the company derives a fair portion of its income from Citibank Plaza and the Great Eagle Centre has analysts wondering what will be the impact on the company's bottom line as office rents continue to fall. The Estimate Directory forecast for full-year profit at $778.2 million is flat on the previous year, with earnings per share declining 81 per cent to 35 cents in 1995 and, in 1996, 26 per cent growth in profit to $981 million and earnings per share up 29 per cent to 45 cents. A recent study completed by Vigers and Knight-Ridder found that prime office rents in Central have come off four per cent in the past month while those in Wan Chai and Causeway Bay by a few percentage points more. Many analysts are talking about a further five to 10 per cent decline in Grade A rents for the remainder of the year. And this week, a report from Baring Securities predicts that office rents are going to tumble a further 25 to 30 per cent before the end of 1996. These are worrying times for property counters like Great Eagle who count on a good deal of their recurrent income from this very sector of the property market. There can be no doubt that it will have to be an astute player if the company hopes to keep on booking solid profits in the face of these alarming statistics. The fact that its profits attributable to shareholders dropped by 7.7 per cent during the first six months of this fiscal year should be warning enough to the company that the wolves are at the door. The company's Citibank Plaza is a good example of the fine line it will have to walk if it is to generate continued and sustainable profits. Like so many property counters in a depressed market, recurrent income is the company's trump card. Kill that golden goose with outrageous rent demands and you may as well lock the door and turn out the lights because people are just going to move to cheaper accommodation. We have already seen that in Hong Kong. When Great Eagle began renting out its intelligent building a few years ago, the office space was going for about $40 per square foot, according to best estimates. Today, that space is probably worth more than $80 per square foot. But if Great Eagle thinks that it can get anywhere near that amount of money, in today's market it is deluding itself. The current downturn in the property market means that while Great Eagle will see a large number of rental reversions coming up during the next quarter or so, it had better be prepared to be flexible with tenants unless it wants to see them leave in droves. If the company plays its cards right and locks tenants into reasonable contracts, it may just be able to ride out this supposed long-term downturn in the commercial property market. There is the theory that bankers and lawyers will always want to be located in the prime areas like Central - but it is true only up to a certain point. Even Hongkong Land and Swires know when it is time to cut a deal to keep tenants. Let us hope for the sake of Great Eagle it knows how to do the same.