The decline in grade-A office rents has accelerated since the September 11 terror attacks in the United States, according to property consultants' surveys. Cushman & Wakefield found prime-office rentals dropped more than 10 per cent during October, compared with September's 4 per cent decrease. Chesterton Petty reported signs of acceleration but more moderately, with rents in October falling 4.8 per cent, compared with a 4.3 per cent drop in September. CB Richard Ellis said there was no significant difference in the rate of decline between September and October. Analysts said consultants' figures would vary due to differing survey methods. By measuring net effective rent, Cushman & Wakefield's figures show more apparent fluctuations because, in addition to face rent, it takes rent-free periods and other incentives into account. Cushman & Wakefield's estimates showed net effective rents of prime offices on Hong Kong Island fell 13.1 per cent to an average of HK$40.07 per square foot a month during October. The fall accounted for much of the rent reduction in the past three months, which totalled 18.4 per cent, resulting in an accumulated 30.3 per cent decline from the first quarter. The consultancy said net effective rents in Central fell 10.6 per cent last month to HK$35.39 per sq ft. John Su, regional director of Cushman & Wakefield, said the October acceleration in rental decline was not directly linked to the terrorist attacks despite its impact on the general economic environment. He said the acceleration was a result of revived leasing activity following the quiet months in July to August, where people were away for holidays. 'Rent-free periods given to tenants are now as long as seven to eight months, while early this year, the periods lasted only three to four months,' he said. However, Mr Su said the company had revised downward its forecast for office rents following the attacks. It projected another 20 per cent decrease in rents in the next 12 month, compared with 15 per cent previously. 'We made the revision because various institutions' economic growth forecasts [have been] revised down after the September attacks,' Mr Su said. Because an expected recovery in the US economy in the middle of next year would benefit Hong Kong, Mr Su said the company would look at a bottoming out of office rents in the first half of 2003. Watson Chan, research director of Chesterton Petty, said the September attacks partly explained October's decline in rents but the trend for rentals had been moving down since early this year. Mr Chan expected the downward movement to continue because there were not many big tenants looking for prime space since JP Morgan committed to lease 11 floors at Hongkong Land's Chater House, at 11 Chater Road in Central. More prime space will be available at Two International Finance Centre on the Central waterfront. Mr Chan said subletting or surrendering space would continue to grow, with investment banks making staff cuts and a drop in business at Japanese finance companies. CB Richard Ellis executive director Terrance Chow said: 'Our October and September figures [showing a decrease in rents] were not so different, but different research methods could result in different conclusions.' He said the terrorist attacks should not have an immediate impact on the rental market because negotiations for leases did not stop after the event. But it was unknown whether company expansions or relocations in the planning stage would be changed following the tragedy and this longer-term effect would only be seen after nine months, Mr Chow said. Vigers Hong Kong chairman Gareth Williams said the impact of the terrorist attacks on sales was immediate, with average central business district, grade-A office capital values declining more than 7 per cent to HK$6,300 per sq ft. Other locations declined by about 5 per cent compared with the second quarter.