Leasing activity in Mayfair and St James's slumped to its lowest level since 1997 during the second quarter of 2002, with just 75,799 sf let. This is less than a third of the quarterly average over the last five years.

Cluttons' Head of Research Neil Chegwidden said: "While these figures are still a long way from the peak vacancy rates of around 20% witnessed in the early 1990s, they show declining demand for expensive office accommodation with business confidence hit by the recent stock market and accounting crises."

There has been a substantial increase in the availability of small suites of less than 5,000 sf and overall, availability in Mayfair and St James's has increased by 40% so far this year with over 2 million sf now available. However prime rental values in Mayfair and St James's have remained unchanged in the last quarter at £65 ($100) per sf.

Chegwidden warned: "In St James's, falls in office rents at the top end of the market are becoming increasingly possible, while non-grade A rental values undoubtedly have further to fall. Dramatic falls are unlikely however, unless occupier demand takes a further knock." He pointed out that 77% of the 219,648 sf of office space currently under construction in the area has been pre-let, protecting rents from the impact of a surge in supply.And in Mayfair only 26% of the 301,992 sf of offices under construction has been pre-let, and there is a further 676,167 sf in the planning pipeline. "Here rental value falls are also increasingly likely,." Said Chegwidden.