Office vacancy rates in the City of London are likely to move into double-digits by the middle of next year, as mass layoffs in the banking sector take their toll, according to Andrew Burrell, a partner at King Sturge.

According to King Sturge, vacancy rates in the City of London currently stand at around 7.8% and rising vacancy rates will inevitably put downward pressure on rents.

Burrell said: “Supply is going to outstrip demand in a way it hasn’t done for several years. Companies are considering whether to move or nor much more carefully. We think rents in the City are likely to fall by up to -10% over the next 18 months. But it’s hard to predict just how much surplus space will come to market from the banking sector – our estimate is quite conservative, so rents could fall even further.”

Prime rents in the City of London are between £55-57 sq ft. King Sturge estimates that they will drop to around £50 sq ft and stay at that level until 2011. In London’s other large office submarket, the West End, rents are also likely to fall, but more slowly, from £110 sq ft to around £100 sq ft by 2010. The West End has less exposure to the financial sector than the City, which makes it a less volatile submarket.