Credit crunch hits office demand

The outlook depends how quickly confidence returns, Savills says

Demand for London offices has fallen "significantly" in the first three months of 2008, according to property firm Savills.

The retail property market is also "subdued" across the UK as the credit crunch continues to bite, it says.

Savills, which also sells top-end homes, said its Prime Central London index had fallen by 1.5% - after a 2% fall in the final quarter of 2007.

Outside London, house prices had slipped by about 0.5%, it said.

Observers said that top-end house prices had been holding up, despite the tighter credit markets which have hit the wider residential market.

However, as the troubled banking sector begins cutting jobs, demand from City workers is expected to wane.

Savills said the outlook for its markets in the UK, Europe and the US depended on "how quickly confidence returns to financial markets".

It added that its consultancy, property management and fund management businesses, "whilst not totally immune to the impact of the credit squeeze, continue to enjoy good demand for their services".