The amount of unlet office space in the City and Canary Wharf is set to double to 10 per cent over the next year as a glut of new buildings without tenants come on the market, new research reveals.

The latest half-yearly London construction report from Drivers Jonas, the property agents, advises developers to be braced for a “tidal wave” of new unlet space equivalent to 14 Swiss Re “Gherkin” skyscraper buildings coming on to the market between now and 2011.

Big banks, such as Deutsche Bank, law firms and accountants started to put their search for large new London premises on hold late last autumn at the onset of the credit crunch, but Drivers Jonas predicts that the delay will be extended into next year amid concerns over further City job cuts.

Colliers CRE, the property agent, said yesterday that its profits would fall below forecasts because of the downturn.

New speculative office construction starts have fallen by 50 per cent since the last Drivers Jonas survey six months ago, but 3.26 million sq ft of new unlet office space is still due to be completed this year. In addition, several hundred thousand square feet of so-called “grey space” - let but still empty floors in a building - is expected to be put on the market as banks struggle to fill extra floors they leased between 2004 and 2007 and which are now unoccupied.

Without any new large lettings between now and the end of this year, the total extra space coming on stream would, over the coming year, double the stock of empty City offices to nearly ten million square feet, about 10 per cent of the total stock. Vacancy rates are hovering around 5 per cent.

Next year another 2.41 million sq ft of new speculative City office buildings are due to be completed, again with no tenants yet lined up.

The extra space will put further pressure on City rents, which have been falling since the start of this year. Rents are expected to fall to £52 per square foot by the end of this year.

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