Vacancy rates of prime offices in key mainland cities dropped slightly in the second quarter, reflecting an increase in demand, according to C Y Leung & Co. The property consultant's figures show the vacancy rate in Beijing's grade A offices fell to 33 per cent from the first quarter's 36 per cent, while Shanghai's vacancy rate eased to 43 per cent from 46 per cent. Dalian's and Tianjin's vacancy rates were also lower while Shenzhen's remained steady. The only worse-off city was Guangzhou, whose vacancy rate rose from 32 per cent to 35 per cent. C Y Leung & Co director Alexander Lam said lower vacancy rates reflected an increase in office demand, which was partly attributed to the accumulated effect of the seven interest rate cuts since May 1996. He said mainland companies were playing an increasingly important role in the office market, offsetting to a certain extent the impact of some foreign companies' operational contraction. He said office rents were still falling but the decline was slowing. Asking rents for offices in Beijing, Shanghai and Guangzhou decreased 3.4 per cent, 8.1 per cent and 2.9 per cent in the second quarter, respectively, the consultant said. Rents in Tianjin fell 19.4 per cent, the sharpest fall among the cities. Mr Lam said the decreases in interest rates had also stimulated demand for residential property in the mainland. A Dalian trade fair held in June sold 2,670 homes out of 6,000 units launched in three days, reflecting the high purchasing power of mainlanders, he said. According to a recent survey conducted by the consultant, 3 per cent to 5 per cent of the Shanghai residential units were bought by investors. Mr Lam said the interest-rate cuts had encouraged some investors to enter the market.