THE predicted glut in new Grade A office space may not be as bad as expected, Morgan Stanley Asia managing director Peter Churchouse says. He said yesterday that delays in construction on some large projects would counter predict over-supply. For example, Great Eagle's planned commercial project in Mongkok, in co-operation with the Land Development Corp, is due for completion in 1997. However, Great Eagle has not yet taken possession of the site and he said therefore it would be difficult for the company to complete the proposed 750,000-square-foot building by the end of 1997. Chinachem's Nina Tower development in Tsuen Wan is due for completion in 1998, but it is believed the project has not yet received planning permission. Nina Tower is to be more than 90 storeys and provide about 1.57 million sq ft of space. Updated figures by Morgan Stanley's show supply increasing to about six million sq ft in 1997 and 1998, then dipping to about 2.5 million sq ft in 1999. Mr Churchouse said: 'There is a much greater chance of delays to what is already an ambitious schedule.' Because of healthy demand, he said vacancy rates would rise little from current rates to about 10 per cent. 'This is hardly a disastrous scenario for the office sector,' Mr Churchouse said. 'Forecasts suggest a continuation of the rising - followed by a levelling - of demand in the office market as Hong Kong becomes much more service-orientated.' Office prices have dropped 40 per cent in recent months ahead of an expected flood of supply - more than Morgan Stanley had earlier predicted. 'We believe this is positive because it suggests the risk to prices may be less, because they corrected with such ferocity in a short time,' Mr Churchouse said. Grade A office rents in Central dropped 10 per cent from their peak last year, and further falls are expected. Because of the property downturn, investors have stayed away from property counters on the Hong Kong stock exchange. But Mr Churchouse said the worst would be over towards the end of the year. 'Given the steep fall seen so far in the office market, we think the downside in percentage terms from here is probably not so great,' Mr Churchouse said. 'In about six months, the situation will improve.' With this in mind, Morgan Stanley said property stocks such as Great Eagle and Amoy Properties would be good buys in six months.