The number of office blocks being built in Central London has reached its lowest level on record, creating a supply shortage that will push up rents by as much as 15 per cent from 2011.

The amount of speculative space under construction has fallen by 48 per cent from the peak 18 months ago, according to the latest Crane Survey from Drivers Jonas, the property consultancy. By 2011, completions of new commercial buildings is set to reach the lowest number for 30 years, it adds.

It takes an average of 18 to 20 months to build an office block in normal economic conditions, but many developers have stopped work halfway through projects or have postponed them because of the downturn. A lack of lending from banks and declines in capital values have made office development increasingly uneconomic.

Drivers Jonas said that only 12 new developments had been started in the past year in Central London, the lowest annual level of new starts that the consultancy has recorded. There were 61 a year at the peak of the market and a long-term average of 45 each year.

There are only five buildings scheduled for completion after next year and only two large schemes in Central London that will be ready for occupants in 2011, according to the Drivers Jonas report. The consultancy said that there was 9.4 million sq ft of empty office space in the capital, of which four million sq ft was “quality”. It added that this would be taken up rapidly in the next six months by tenants wanting to arrange cheaper deals for desirable offices. Occupier demand began to rise in the City and in the West End in the third quarter, after several months of decline.

Matthew Elliott, head of transactions for Drivers Jonas, said that the looming supply shortage was already making landlords less likely to offer discounts. He said: “Where are the next big buildings for Deutsche Bank, Bloomberg and others? With so few large buildings available, major occupiers are going to have to pay significantly higher rents to persuade a landlord to build one for them. For the best space, landlords are starting to feel bullish and are trying for higher rents and lower incentives.”

Rents for prime office space in the City have fallen from £65 a sq ft at the peak of the market in early 2008, to £42.50 a sq ft now. A 15 per cent rise would take rents back up to £49 a sq ft.

The property consultancy said that the only two large schemes due for completion at the end of 2011 were Cannon Place, by Hines, and The Shard, by LBQ Consortium and the Sellar Property Group, resulting in the lowest level of completions for 30 years in 2011.

Drivers Jonas said that despite the lack of construction, there was a large volume of space in the planning pipeline, while 27 million sq ft of sites had planning permission. However, “the lack of finance, planning tariffs and the viability of schemes drawn up in a hot market are too big to overcome in the short term”.

The office developers with the most space under construction in London are Minerva, Canary Wharf, Land Securities, LBQ Consortium/Sellar and Heron International. The biggest schemes under development in Central London are Minerva’s St Botolphs, in St Botolphs Street; Heron Tower, Heron International’s scheme on Bishopsgate; Cannon Place, on Cannon Street; The Walbrook; and Central Saint Giles.

In the past six months, work has also begun on 1 Kingsway, by UK & European Investments; The Crown Estate’s Quadrant 3 building on Regent Street; 98-100 Jermyn Street, owned by IVG UK & Gracemark; and 65-69 Wilson St, by Nyraff.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax