Bank of England Governor Mervyn King is having a busy week. Formulating plans to assume zillions in property debt must be taxing. Perhaps a lunchtime stroll? It's a good way to see the City of London is in deep physical as well as financial trouble.

The 60-year-old might want to stretch his legs by stepping out of the staff entrance into Lothbury, and then going left into Gresham Street.

Here the pavements are narrowed by hoardings guarding four almost complete office developments. They contain more than half a million square feet of space. None has yet found a tenant.

Mervyn might fancy a tuna sandwich at the taxi-drivers' café, the Piccolo, at the top of Gresham Street. That will help fortify him for what lies around the bend, on the London Museum roundabout.

Here stand the former offices of lawyers Clifford Chance. A valiant attempt has been made to give the brutal marble and black ziggurat a makeover. But the 380,000 sq ft of space in what is billed as the "gateway to London" is still "available this summer".

Discouraged, the Governor might turn back towards the Bank by way of Cheapside. This would give time to reflect on how the 40,000 job losses now being predicted for the City would empty eight Gherkin-sized towers.

The route also has the advantage of taking him past a gigantic cleared site opposite St Paul's, then another down by Walbrook. Just before ducking back into the office, Mervyn might take a peek at the hoarding on 67 Lombard Street. A sign proclaims that Exemplar Developments will have a 93,000 sq ft office block ready by 2010.

But Exemplar, which is backed by Morgan Stanley, who know a thing or two about the state of the market, have quietly stopped work.

Unless King finds a magic wand on the desk when he gets back to the office, an awful lot of builders as well as white-collar workers are going to disappear from the City over the next six to nine months.

Figures from NB Real Estate show there is 6.8 million sq ft of office space under construction, and that 5.9 million of that has not been let.

Worse, about 3.8 million of that space will be finished by the end of the year says the property agent.

Drivers Jonas, an agent that produces half-yearly "crane surveys" of the City, suggested this week that the amount of space under construction might be even higher, at 8.2 million sq ft, with around sevenmillion of that unlet.

Those seven million sq ft amount to about 18 months of normal take-up. Make that three years today, if developers strike lucky. Top this up with space freed by fired City workers, and it soon becomes possible to imagine the City being a very quiet place until Olympic year.

This gloom is of course good news for anyone looking for a nice new office. Rents in the City will fall by 15%, said Lehman Brothers last week. Until now, letting agents have stuck grimly to saying rents for prime space are around £60 per sq ft.

But they are being forced to dangle longer and longer rent-free periods to prop up this "headline" rent.

Now it looks very much like that £60 will drop towards £50 any time soon: solace for the beleaguered financial institutions who have given Mervyn such a busy week.

No bubbly for beaten troops of Erinaceous

The 58-year-old is retiring next month after nearly 20 years with the property adviser, leaving a hard-to-beat record. When the tanned accountant joined in 1990 the business turned over £24 million and made a loss. Last year revenues were £650 million and profits £86 million.

Now the war story: this week the 5000-strong insurance-to-property group Erinaceous was dismembered and the headquarters in Piccadilly captured by KPMG. The group has unpayable debts of £250 million. The banks have seized the still-profitable insurance business. The bit that manages the property of others fights on. But the battalions pulled roughly together to take on the likes of Savills were scattered by the KPMG administrators on Monday.

This disastrous venture was led by Neil Bellis and his sister-in-law Lucy Cummings. The pair began assembling a "one-stop property shop" in 1999. Nigel Turnbull, who had produced a report on guidelines for listed-company directors, joined the board in 2002. Lord Razzall, Liberal Party spokesman on trade and industry, was also hired. Bellis and Cummings bought up dozens of small property-related consultancies with the intention of floating a business whose crazy name means "hedgehog-like".

Their style pricked all those who took the Erinaceous shilling. Key staff left. A float that valued it at £400 million was announced last year, to widespread disbelief. Economic heavy weather mired that. Bellis and Cummings were stood in front of a bankers' firing squad in September. First Turnbull, then Lord Razzall tried to save the day, to no avail. Savills, founded in 1855, marches on.

No sex please, we're Egyptian

An Egyptian chain called Cilantro is opening up in competition to Starbucks and Costa at 193 Piccadilly.

The eight-year old business founded by Maher Maksoud has 50 outlets in Egypt. Maksoud is planning 20 outlets in Britain over the next three years. On top of a hefty rent deposit Cilantro is spending £150,000 fitting out the Piccadilly café in soukmeets-teashop style.

"We want it to be friendly, cosy and warm," Nadine Beshir tells EG Retail this month.

Not like America then: over there, the latest coffee shop craze is one where scantily clad young women serve coffee concoctions with names like Wet Dream (caramel and white chocolate) in "sexspresso" shops with brand names like ChickaLatte.

How Grosvenor rides the storm

The figures show a 3% rise in profits to £524 million. They have been overshadowed by a further £48.8 million provision on a £1 billion shopping centre development in Liverpool, which has already sucked £140 million from the balance sheet.

But on Monday 52-year-old Newsum was able to announce a 19% increase in net asset value to £3.1 billion. This figure is the one that really matters to property watchers. The gap between the value of what a property company owns and how much it owes is the key indicator of health.

Here is a sure bet: the NAV of Britain's number one property company, Land Securities, will not go up 19% when it announces its annual results on 14 May. Nor will that of near-rival British Land, which reports on 23 May. Expect falls. The year in question for Land Securities and British Land will be 31 March 2008. That is a rather nastier period than the whole of 2007, which enjoyed economic sunshine until June.

Nevertheless, Grosvenor had six months of hell and has still done well. What are they doing right? Well, it helps if you have been in the business for over 300 years and £2 billion of your £3.4 billion of UK properties are clustered on the final two squares of the Monopoly board, Mayfair and Park Lane. That helped the business push up the NAV of its UK property business by 6% to £1.6 billion.

But the real difference is that, unlike British Land and Land Secs, Grosvenor has worked overseas for more than half a century, initially venturing into the old empire countries of Canada and Australia, then latterly into America and Asia and continental Europe. Today half the £6.2 billion of directly-owned properties lie beyond Albion's shores.

Grosvenor also manages £3.1 billion of its and other people's property, held in 66 funds. Add a few joint-venture operations with a value of £3.5 billion on the Continent and in Asia, and you have a £12.8 billion business of a very different stripe to Land Secs or British Land, who will attract much grimmer headlines next month.

PETER BILL IS EDITOR OF ESTATES GAZETTE
www.egi.co.uk