The City and Canary Wharf are on the brink of a property slump as millions of square feet of office space lies empty in the face of tens of thousands of job losses, experts are warning.

The London business districts - widely regarded as the financial capital of Europe - is facing "imminent stress" according to Moody's, the credit-rating agency that has analysed the effects of the credit crunch on the property market. A survey by Moody's reveals the London office market is deteriorating faster than any other capital in Europe. The report, which looked at the effects of the slump in the commercial mortgage-backed debt market, says rents, occupancy and sales rates are set to worsen the longer the crisis continues.

London could feel the effects even worse in the coming month as so much more office space is coming on to the market as developments come to fruition.

It is reckoned 7.3 million sq.ft of space will be available from developments by 2010 - an increase of up to one-twelfth of all office space in the Square Mile and Docklands.

That comes as about another 4 million sq.ft becomes available from job losses, according to property consultants Cushman & Wakefield. The consultant calculates that for every 10,000 job lost, 1 million sq.ft of space becomes available.