And Insignia Richard Ellis's research shows that supply is still increasing with a rise from 14.8 million to 16.7 million sf over the second quarter. The surge in vacancies has been most evident in the City of London, where the vacancy rate rose from 7.0% to 8.5% in just three months. This situation could worsen next year unless there is a surge in leasing activity, because IRE calculates that here is 2.2 million sf of unlet space under construction in the City due to come to the market during 2003.

The West End, which is less dependent on financial service occupiers, has proved more resilient, with vacancies rising from 5.2 million sf to 5.6 million sf over the quarter. A 22% leap in West End leasing activity saw 1.1 million sf taken up during the quarter. This is the first time for a year that West End leasing has hit the long-term average.