Commercial property agent DTZ has warned that office rents may tumble this year. DTZ is predicting a 15-20% fall in office demand in 2008 as banks and other financial institutions reduce their overheads, which will almost inevitably lead to a softening of rents and the increase in incentives such as rent-free periods.

Commercial property prices began to fall in the summer but the pace quickened due to the credit crunch. Until now, depreciating capital values have led investors to expect higher yields. This is because rents have held up, particularly in Londons West End where vacancy rates have been at record lows. According to DTZ, that could now change. It believes the shift in power will be an opportunity for corporate occupiers to drive down their rental bill.