ANALYSTS and estate agents do not seem to be able to agree on how much further Grade A office rents in core Central and Admiralty may fall. Some analysts warned that 1989, when rents in Central dropped by as much as 40 per cent following the military crackdown on June 4 in Tiananmen Square, could happen all over again. Rents then fell from an average of $66 per square foot to just above $42 per sq ft in Central. It took a couple of years before the market recovered. But others claim that doomsday scenario is far too bleak, arguing that the prestige of being in Central is enough to prop up rentals. The bulls argue that rents may slip by only another 10 per cent at most until the middle of 1996 or early 1997. In fact, the experts cannot even agree on how much prime office rents in Central have fallen from their peak last year, let alone what might happen in the future. Estimates vary from three to 10 per cent. 'Rental indices are being whip-sawed all over the place because the transaction levels are so low,' said one estate agent. 'There are people who must be in prime locations,' said Allan Yeung, managing director with Colliers Jardine. 'In these locations, I don't see the vacancy rate going up much. I don't see why rents should plummet.' Estate agents such as Mr Yeung agreed that while decentralisation was happening to a degree, it should not drive rents in Central into a tailspin. Mr Yeung, who has seen the decentralisation phenomenon in Toronto and New York, said rents in prime areas of those cities were not moving much because of the limited space and status of the areas. People were always eager to move into 'gold-plated' areas, such as core Central, he said. Nonetheless, some analysts are sticking to their guns and predicting that rents will plummet the way they did in 1989. According to a Baring Securities analysis, rents in Central, which have fallen five per cent since the peak of the market last year, will drop a further 25 per cent by 1997. Baring property analyst Nichols Pang said the principal reason for the continued fall in rents was the amount of cheaper Grade A office space coming on to the market in places such as Quarry Bay, Wan Chai and even Sha Tin. Those locales would lure businesses out of more expensive locations in Central because they offered cheaper rates. A research director with a leading brokerage said all companies had a 'trigger point' at which a company would ask itself if it needed to be in Central at all. 'Landlords in Central have to be careful that the differential doesn't get too wide,' he said, 'or they will find their tenants looking at decentralisation.' If anything, sheer economics will drive businesses out of Central and Admiralty, according to Hugo Poon, managing director of Central Property Consultants. High interest rates, inflation and economic austerity across the border were gradually squeezing businessmen's profit margins and forcing them to move, he said. 'People in Central complained that rents were too high,' he said. He recently released a report which said that rents in Central and Admiralty dropped by just over three per cent in May and 8.9 per cent since the beginning of the year. 'The businesses have very tight profit margins. If there is no profit then there is no point in being in business. So they are going to look for cheaper office space,' he said. Mr Poon said there was strong resistance to high rents among businesses in Hong Kong. He agreed with a number of other reports which concluded that rents in Central and Admiralty were in for a steep decline. But he said it was difficult to predict how much further they would actually fall. However, rents charged by the major landlords did not yet seem to be falling. Statistics released by a variety of agents indicate that some businesses are still willing to pay more than $100 a sq ft for space in Exchange Square. The vacancy rate is reported to be low. What had become increasingly apparent for the past six months, estate agents said, was that companies were economising by moving portions of their operations to far-flung areas. But with the likes of Pacific Place, Convention Plaza and Quarry Bay and even the Land Development Corporation projects promising quality space at reduced prices, experts said it was only a matter of time before rents in Central came under further pressure.