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With London’s once flourishing hedge fund sector declining, Mayfair and St James- which houses some of the finest and costliest commercial property in the UK – has witnessed a fall in letting prices.

According to property managers, lets in their hedge markets had witnessed a meteoric rise in 2007, with owners fetching £120 per sq ft. But the scenario has changed now, with rates coming down to a record low of £55. Vacancies created by enterprises that failed to withstand the knocks of recession are chiefly responsible for this decline.

Property agent King Sturge reports that the quarterly rent per 5,000 sq ft in the area has sunk to a miserable £69,000 from £144,000. James Beckham, a partner at King Sturge, reported that owing to a lot of existing vacancies in hedge funds in the area, the rents have witnessed a swift decline.

King Sturge, during the heydays of office space business in 2007, were successful in letting 870,000 sq ft of space with 77 successful transactions; whereas in 2008, the number of transactions came down to a mere 48, and that of letting to a total of just 595,000 sq ft.

However, the existing vacant spaces in London are currently being lapped up by businesses following the rapid fall in rent prices. The landlords, for obvious reasons, are considering it feasible to accept lower rents and desk space to rent than to get stagnated in business with empty offices at rates of £25,000 a quarter.

Landlords are compensating this reduction by a simultaneous reduction in the lease period. Short term leases are becoming popular in real estate business, so that rents can be raised once the economy becomes stable and property dealers gear up for competition.