The outlook for the industrial office sector appears bleak, with analysts predicting rents coming under pressure because of oversupply. Vigers' property market review reports that industrial office supply this year is estimated to total 2.2 million square feet - the highest in recent years. It said an additional 3.7 million sq ft was scheduled for completion by the end of the century. This significant increase would put pressure on prices. Vigers managing director Albert Chan Kar- chai said most companies were reluctant to move to industrial areas such as Cheung Sha Wan, Kwun Tong, Tsuen Wan and Kwai Chung where most industrial office buildings were located. This was despite the fact that the quality of the newly-developed industrial office buildings was more or less the same as grade B office projects in the urban area. In addition, rents for these buildings were usually lower than for office spaces. However, office rents had dropped substantially as a result of the market which had been depressed by the regional financial crisis, he said. Grade B office rents in secondary locations such as North Point had fallen to below $20 per sq ft. Average rents for high-quality industrial office buildings in Cheung Sha Wan ranged between $12 and $15 per sq ft. 'In this situation, companies are willing to spend a little more to move into Grade B office buildings in urban districts,' Mr Chan said. Industrial office buildings would become less attractive unless rents were reduced to reasonable levels. However, Colliers Jardine said Kwai Chung, Tsing Yi and Tsuen Wan would emerge as new business centres as a result of infrastructure development and the relocation of the airport to Chek Lap Kok. The decentralisation of trade and commercial activities from traditional districts would continue, it said. In the medium term, Hong Kong's industrial property market would continue to evolve to match the growing demand for high- standard commercial space, with an increasing supply of multi-purpose industrial office buildings. Vigers said the vacancy rate for old buildings was around 20 per cent, while buildings less than five years old had a vacancy rate of less than 5 per cent. Rentals in Kowloon East had fallen by about 15 per cent in the last few months, mainly as a result of increased supply in that area, it said. By contrast, Kowloon West seemed to have benefited as more companies relocated to premises near the new airport. Vigers said the rental market in Kowloon West would outperform other districts despite an estimated supply of 997,000 sq ft of industrial office space in the area this year.