Chesterton Petty expects grade-A office rents to decline 20 per cent next year on large new supply and weak demand. The property consultant said in its latest report that grade-A office rents fell more significantly in Quarry Bay, Sheung Wan and Admiralty last month. Rents in Quarry Bay dropped 5.73 per cent, while Sheung Wan lost 4.41 per cent and Admiralty eased 4.17 per cent. Rents in Causeway Bay were stable with a decrease of 0.65 per cent, it said. More leases were taken up last month, with tenants making their decisions before the close of the year, it said. There was less surrendered space in recent months as the economy became more stable compared to the start of the year. Chesterton Petty expected the quiet atmosphere for leasing business space to linger during Christmas and the Lunar New Year holidays. 'Activity is anticipated to remain soft next year with plenty of new supply and continual weak demand, resulting in an anticipated 20 per cent shrinkage in overall rentals throughout 2003,' it said. Office owners would become firmer on prices, which were expected to remain stable in the first half of next year. 'The mismatch of owners' asking prices with potential buyers' offers will result in a low level of transactions during the period,' it said. Last month, it estimated office prices dropped 2.79 per cent on Hong Kong Island to HK$4,820 per square foot and 2.19 per cent in Tsim Sha Tsui to HK$2,754 per square foot. Prices in Central dropped 3.25 per cent to HK$5,080 per square foot. Those in Admiralty and Wan Chai lost 2 per cent to HK$4,751 and HK$4,462 per square foot respectively. Sheung Wan's prices were down 1.7 per cent to HK$3,120 per square foot. The consultant also said the luxury residential market saw recovering buying confidence with improvements in leasing and sales transactions. The pace of decline for luxury rentals slowed in the past few months from 6.21 per cent in July to 1.32 per cent in September and only 0.94 per cent last month. Rents averaged HK$28.57 per square foot on The Peak, HK$21.74 in Island South, HK$23.39 in Mid-Levels and HK$19.89 in Happy Valley.