Layoffs across the financial sector and related industries are also serving to curtail demand.

Two of the country's biggest commercial developers and landlords, Land Securities PLC and British Land PLC, have between them offloaded almost £5 billion ($8.68 billion) in assets during the last fiscal year. And they aren't alone.

U.K.'s real-estate giants have been selling properties to reduce debt and position themselves for further market declines. New commercial-property developments - once constructed with confidence in a quick lease -- are also rare as businesses fail to secure financing.

"Headlines will be negative for some months to come," said British Land's departing chief executive, Stephen Hester.

Industry specialists warned that after 2010, developers will break ground on only a handful of major developments, because even if the funding environment improves in 2009, finance for speculative developments will remain hard to obtain. Speculative development swells when commercial real-estate markets are booming - and declines offer a gauge of market health.

London-based real-estate investment consultants at Jones Lang LaSalle predict that speculative office space delivered to the market will fall to about 2.66 million square feet in 2009 from around three million square feet in 2008. By 2010, the amount delivered will shrink nearly 50% to 1.52 million square feet. By the end of 2009, Land Securities' London developments will total a tenth of those completed during 2007, according to the firm.

British Land, which last quarter sold its Willis Building for £400 million, among other sales, also announced cutbacks in development going forward as job losses in the City of London are no longer restricted to the banking sector but include lawyers and other professionals.

Jobs cuts are boosting vacancy rates and shrinking rents throughout London. London rents have fallen 15% in the City and the West End since 2007 as vacancies force landlords to increase incentives for tenants. Only 1.9 million square feet was leased across London in 100 deals in the third quarter, the lowest level since 2004.

Analysts predict rents will fall an additional 10%, reaching as low as £40 to £45 a square foot during the next 12 to 18 months. This will further curtail supply of property in the short term as it will discourage developers from breaking ground on projects.

Vacancy rates are soaring - they have risen to 8.8% from 4.2% in 2007. But landlords hope that with few new projects in the works, vacancy rates will fall to about 8% in 2010 or so, driving rents up and expanding yields for commercial-property companies.

"It is important to remember that we are in the down part of a cycle and the actions being taken in these gloomy times ... will in fact sow the seeds of recovery," Mr. Hester said.