Demand for office space in London fell dramatically in the first three months of 2008 as the impact of the credit crunch took hold of the commercial property sector.

The prime central London index - produced by property firm Savills - fell by 1.5% in the first quarter of 2008 on top of a 2% drop in the last three months of 2007.

Retail property prices remained subdued across the rest of the UK, the report said, while house prices outside of London slipped by 0.5%.

Savills added that the property market would remain weak until confidence returned to the financial markets.