Offices in central London are set to record double-digit rental growth in 2010, according to Knight Frank.

The property adviser forecast a return of expansion-led occupier growth, as London's internationally-facing economy benefits from an upswing in global trade and financial markets. In addition, the lack of speculative development will result in a sharp fall in availability in the next two years.

Knight Frank also forecast a significant increase in values this year, as the projected rental growth is priced into the market and more institutional property funds look to invest in 2010. Knight Frank anticipates the rebound in property prices to be sustainable, as activity is consistent with past cycles and there is continued interest in London offices from sovereign wealth funds.

James Roberts, head of central London research, Knight Frank said: 'Although the situation in the UK economy is fragile and will remain so, I view developments in the global economy and financial markets as more important for the London office market. This is due to the international profile of companies operating here. Many of the largest office occupiers in the capital earn most of their revenues overseas, and I believe recovery for the world economy will lead to increased office demand in 2010.'

Will Beardmore-Gray, head of City leasing, Knight Frank said: 'Due to the lack of new development starts across London in the last two years, supply will come sharply under pressure in the next two years. In fact, we are expecting a supply crunch in 2011, as an inadequate development pipeline collides with strong structural demand and tenants expanding in response to a stronger global economy.'

Ker Gilchrist, head of West End Investment, Knight Frank said: 'We are not subscribers to the mini-bubble theory, as rental growth is forecast and there are encouraging signs in the occupational market; this is drawing in more investors. Growth is sustainable, thanks in part to growing international buyer interest, particularly from Sovereign Wealth Funds focussing on quality assets and the fact that capital values will rise significantly this year and next. We view this year’s focus as being on development sites and short turn-around refurbishments, due to the constrained development pipeline, and trophy assets as more international fund money focuses on London.'