Steve Mallen, Knight Frank's head of research, says: 'The economic uncertainty is causing concern among the business community and in many cases organisations are scaling down their expenditure until they can see that the recession is not hitting.'

Despite this, take-up around the M25 remained robust in the first quarter, with 775,000 sf of standing stock absorbed. This is down by 6.7% on the previous quarter, but still significantly up on the first quarter of 2000. In addition, another 955,000 sf of space was pre-let bringing the total of space transacted to 1.73 million sf, a 20% increase on the previous quarter. Mallen said pre-lettings have become an important feature of the M25 market, reflecting the low levels of prime space supply.

This tight supply is likely to ease over the coming year, with an increase in development activity. Space under construction rose during the quarter by 37% to 5.16 million sf.