City building down as demand dries up

Office development in London has dried up this year in the face of recession.

Construction began on just six new buildings in the capital in the last six months meaning only 23 developments have started over the past year compared with 61 in the previous 12 months.

The "crane survey" by property consultant Drivers Jonas also found 7.2 million square feet of speculative space — without a tenant lined up — is under construction.

Although this was down 35% on 12 months ago, some 4.1 million square feet will be completed this year, adding to the 5.8 million square feet of empty space already on the market.

Anthony Duggan, head of research at Drivers Jonas, warned many of the offices will lie empty for some time as banks, law firms and other companies fire staff and stop taking new space. "London offices are taking the full force of the financial crisis," he said. "Life is as tough as it gets in the City office market at the moment. It is looking like a pretty wretched year."

It has pushed down rents and values in recent months.