Property investment stocks are facing enormous pressure amid concerns developers of Two International Finance Centre (IFC) in Central might undercut office rents to lure tenants, according to ABN Amro. Anton Kwang, property analyst at the securities house, expected effective rents at Two IFC might be initially priced as low as HK$25 per square foot a month after its launch. He believed corporate expansion would be rare in the present economic situation, while most investment banks, major potential clients, had finished their relocations in 1998. As top office space in Central such as Citibank Plaza and Exchange Square were only rented at HK$30 to HK$40 per square foot, Two IFC had to provide incentives to tenants for its initial launch, Mr Kwang said. The 88-storey, two million square feet commercial tower has been developed by Sun Hung Kai Properties (SHKP), Henderson Land Development, Hong Kong & China Gas and Bank of China Group. Mr Kwang said undercutting rents at the project would not significantly affect SHKP's valuation because it was not a large project. However, it did create enormous pressure on property investment stocks such as Hongkong Land, Great Eagle Holdings and Hysan Development. In a report, ABN Amro said: 'Our impression after speaking to estate agents and landlords is that the office market remains extremely fragile. New demand is virtually non-existent in Central except for relocation by smaller tenants.' 'The big question is at what rent [Two] IFC Tower could lure existing Central tenants to spend HK$500 to HK$1,000 per square foot [of capital expenditure, the equivalent of two to three years' rent] and justify a relocation.' The report said the launch of Two IFC had been postponed and a further delay was impossible, given the landlord's commitment to the Hong Kong Monetary Authority, which had bought the top floors. Meanwhile, a Dao Heng Securities report was also cautious about the office rental market, saying the economic slowdown combined with the September 11 terrorist attacks in the United States had accelerated the correction of office rents and prices last year. Two office units in No 9 Queen's Road Central were recently leased at an effective rent of HK$15 to HK$18 per square foot against average rent in Central of more than HK$40 per square foot, it said. Dao Heng Securities predicted a 10 per cent drop in rents this year and recommended underweight on property investment stocks.