NEW office space is expected to double next year, further flooding Hongkong's already over-supplied market. The Rating and Valuation Department predicted in its preliminary annual review that 472,000 square metres of new office space would enter the market this year and 833,000 sq m in 1994. While office rentals have recently been staging a comeback after a couple of depressed years, capital values appear to be peaking. Such a large supply of new space could have a serious dampening effect on prices in some areas and send vacancy rates climbing. Sheung Wan, Wan Chai, North Point and Tsim Sha Tsui can all expect exceptionally large amounts of new office space over the next two years. A hefty 500,000 sq m will be entering the market over the two years in two areas not usually associated with office development, Hunghom and Kwun Tong. The total new office supply throughout Hongkong last year was 565,000 sq m, up 23 per cent on 1991 but well short of the 749,000 sq m that had been forecast. Although the take-up rate did improve last year, the large volume of new supply caused the overall vacancy rate to rise to 9.5 per cent. The Government indicated that much of the 204,000 sq m of new Grade A office space this year would be in Wan Chai and North Point. Much of the 398,000 sq m of Grade A space expected in 1994 would be in Tsim Sha Tsui, Hunghom and North Point. In stark contrast, the amount of new top-quality space in Central was forecast to be just 7,600 sq m over the two years. The supply of cheaper Grade B office space was expected to grow at a more modest rate of 11 per cent this year to 157,000 sq m, but then double to 316,000 sq m in 1994. Much of this will be in Sheung Wan, Wan Chai and Aberdeen. Forecasts for Grade C space pointed to completions of 111,000 sq m and 119,000 sq m in 1993 and 1994, respectively, much of it in Sheung Wan, Central and Tsim Sha Tsui. The government review showed that completions of small and medium private domestic residential units in 1992 totalled 25,140 units, well down from expectations. Take-up was marginally down, causing the vacancy rate to increase to 4.2 per cent. Around 35,600 units were expected to enter the market this year, mostly during the first six months, and roughly the same amount again in 1994. Much of the two years' supply will be in Yuen Long, Tuen Mun, North Point and Sha Tin.