London offices' '20% rent fall'

The cost of renting an office in central London is set to fall by at least 20% in the next two years as financial firms' demand for space weakens.

The verdict of the British Council of Offices will send a chill through the capital's landlords, already reeling from the credit crunch. But it could be good news for London as the lower prices attract more firms to the City in particular when the market turns.

CO chief executive Richard Kauntze said in a report: "London has seen the greatest rental increases and, because of the strength of its financial sector, it is more exposed to the effects of the credit crunch. This, combined with weaker demand and rising supply, means that we expect central London to experience a significant fall in office rents over the next two years.

"Recently, we have seen some international companies favour Manchester over London when it comes to locating their UK operations. however, with office rents set to fall, London will certainly become more attractive to those kinds of occupiers."