Property consultants said there was softening demand for office space as a result of the slowing United States and global economies.

Amanda Gao, general manager of Colliers Jardine Beijing, said: 'The office-sector decline [in Beijing] has suffered the double impact of the global slowdown and that of the September 11 terrorist incidents in the US.'

The Beijing market had seen vacancies soar and rentals fall, with a 54 per cent decline in net take-up projected for the year, Colliers Jardine said.

The diminishing demand for Beijing office space was underscored by a 5 per cent quarter-on-quarter increase in the average vacancy rate to 16 per cent. Grade-A vacancies in the Chaoyang district increased 5 per cent to 21 per cent due to slower take-up.

Also reflecting the weak market sentiment was a 1.4 per cent quarter-on-quarter rental decline across all office grades in Beijing. Average rentals for all office grades stood at US$25 per square metre per month, a 14 per cent fall from the fourth quarter of last year.

Due to the sluggish conditions, Colliers Jardine has revised its earlier grade-A rental forecast for the end of this year to US$28, a 9 per cent drop year on year.

Ms Gao said another problem lay in the structural oversupply of office space.

However, she said: 'Potential investors seeking medium or long-term returns can consider acquiring investment-grade properties in Beijing now.

'Looking beyond the next few quarters, the Beijing office market will gradually rebound on the strength of China's accession to the [WTO], along with the anticipated recovery of the European and US economies towards the end of 2002.'

During the third quarter, Beijing's total grade-A office supply exceeded two million sq metres, Colliers Jardine said. Prominent buildings coming up in the central business district include Beijing Finance Centre, Silver Tai World Trade Centre and Jianwai Soho.

Colliers Jardine said the net absorption level for the first three quarters reached only 390,000 sq metres, a 54 per cent decline from the previous year. It expected that by the end of this year, the total new supply of grade-A office space would outpace total net absorption by 50 per cent.

FPDSavills general manager in Shanghai, Sam Crispin, said more foreign companies were setting up business and expanding operations in China with the country's WTO entry.

That was offset in the short term by the slowing US and world economy, he said.

'We remain broadly positive about office demand for the coming two years with WTO and the continued comparative strength of the Chinese economy and expect demand for new projects to be reasonable, provided they are offered at market rents,' he said.

According to a Xinhua report, with China's accession to WTO, increasing numbers of foreign building-material manufacturers are entering China, wanting their share of the big cake.

Shen Jianguo, deputy director of the international relations department of the Ministry of Construction, said China's real-estate companies and building-material manufacturers should base their growth on the needs of the market, which would enable them to withstand competition from overseas rivals.

Xinhua also quoted Cheng Guowei, chief of the science and technology section of Shanghai Zhuzong Housing Industrial, as saying that although weak in technology, domestic real-estate companies were more familiar with the market than overseas rivals, which needed time to fit into the environment.

Mr Cheng said China's real-estate companies should compete by stressing the local features in their products and learn more about advanced technology from their competitors.