THE slump in Hong Kong office sales and leasing is nearing its lowest point, according to a property specialist. Alan Dalgleish, research manager for property consultants First Pacific Davies (FPD), expected the decline to slow in the second quarter of this year. Office rents and sales prices were now at their lowest since the second half of 1993, he said. The fall in office rents would be cut by half during the second quarter of this year, and the pace of falling sales prices will slow by about three-quarters. Office rents would fall by about five per cent in the second quarter, Mr Dalgleish said, compared with the nine per cent recorded by FPD in its Office First Quarter 1995 quarterly property research. 'Renewal is the name of the game [for tenants] because there is a perception that there is a big supply coming in 1997 and 1998,' he said. Despite tenant demand, companies prefer to make do with existing premises, before new office space becomes available. Landlords have become increasingly flexible in their tenant negotiations. Rents in Central, such as Exchange Square, would continue to hold up in the current bear market, while fringe Central sites, such as the Bank of China Tower, would face greater difficulties, he said. Rents are falling faster than average at the Bank of China Tower where vacancies are expected. Rents at buildings where floors are owned on a strata-title basis, were liable to fall faster than those at wholly owned sites, such as Exchange Square. FPD's first quarter report shows landlords who faced the greatest difficulties are located away from Central. For example, while rents dropped five per cent in Central in the first three months of this year, they fell twice as much in Tsim Sha Tsui and by 12 per cent in Wan Chai and Causeway Bay. Mr Dalgleish said prices in well-managed Hongkong Land and Swire Properties holdings were typically the last to fall in a bear market. In the sales market, Mr Dalgleish expected the big price falls which occurred in the six months between October last year and March this year to tail off in the second quarter. Sales prices fell by more than a quarter in those six months, including an 18.7 drop in the first quarter of of last year, FPD said in its report. However, Mr Dalgleish said the decline in sales prices would slow to around five per cent in the second quarter. Few transactions were made in the second quarter, following the same pattern in the first three months of this year, he said. Many investors were caught out financially by the downturn in the market over winter. Some forfeited on deals made at the peak of the market early in 1993, the FPD report says. 'The sales market is lacking direction,' Mr Dalgleish said. Buyers were adopting a wait-and-see attitude, he said. The results of impending government land auctions and cash tenders for sites, such as HMS Tamar, would be used by investors as indicators of where the market was going, he said.