The City of London has slipped in the rankings of Europe's most expensive office locations amid falling demand for space from banks and brokers.

Moscow has overtaken the Square Mile to take the number two slot, although London's West End, with its swanky addresses in Mayfair and St James's, is still number one.

The City has been hard hit by the downturn in the property market and falling demand for space among banks, stockbrokers and other financial institutions since the onset of the credit crunch.

Rents peaked at €890 per square metre at the end of last year but are now just e840, according to the property firm NB Real Estate.

Meanwhile, due to the boom in global demand for Russia's minerals, rents in Moscow have rocketed 46% to €1025.90 per square metre in the past 12 months.

James Gillett, an NB Real Estate director in the City, said: "This is the first time office rents in Moscow have surpassed the City and it is illustrative of how Russia has become a European economic powerhouse in recent years.

"A lot of financial institutions in the City scaled back their requirements for new office space as the credit crisis unfolded.

"This has taken the edge off strong rental growth earlier in the year.

"A fall in rental values in the City looks increasingly probable which will allow Moscow to pull even further ahead."

The West End remains the most expensive office location in Europe with average rents up 23% to €1758.60 per square metre as hedge funds continue to vie for the most prestigious addresses.

"Mayfair and St James's have become home to many of the hedge funds who are willing to pay top rents for prestige properties," said NB's Ray Walker.

"By and large hedge funds have been less affected by the credit crunch than the investment banks located in the City.

"The West End has a more diversified occupier base, making it more insulated from the credit crunch than the City," he said.