The report estimates that employment in London has fallen by 11.6% since its peak at the end of 2000, a loss of 39,000 jobs. Experian believes it will fall by another 2.7% by the end of next year. Companies including Cmmerzbank, Investec and Abbey National are among those planning to reduce wrkforces to cut costs. A recent report by Jones Lang LaSalle said that cmpanies including Citigroup and Goldman Sachs Group are trying to lease 5.6 million sf of unused offices in London, pushing down rental prices.

Jeremy Gates of investment specialist Strategic Real Estate Advisors says this downturn will continue to have an effect on the City leasing market until net new take up occurs. The downturn is already filtering through to the investment market, particularly in the City, which has been propped up by investor purchases due to the falling stock and bond markets. 'On existing investments, rental growth is pretty flat, but the biggest effect is on the new speculative developments,' he says. 'Many are no longer able to achieve rents that justified their development and having to compete with a huge amount of second hand space which was leased by the large corporates in anticipation of future growth. But the reverse has happened and they are leasing space on terms and rents more aggressively than new developments. As such only the most prime new developments are having any leasing success.

'The West End is not so bad off due to limited supply. The upside is some good purchase opportunities are around in the City as the bottom of the market approaches.'