Long-standing boundaries between central London’s property sub-markets are becoming ever more blurred.

When occupancy costs can be cut by 30-40% by moving just a couple of tube stops along the line the temptation for boardrooms to look beyond traditional core areas is becoming irresistible. It’s a trend that will accelerate in 2012 as continuing economic pain forces companies to become more footloose in their search for good value.

Space shortages within the West End and Midtown, in particular, will mean continuing spill over into areas such as Southbank and Clerkenwell which are rapidly becoming established as favoured locations for the TMT sector. Rapid growth is also likely to continue in Tech City around Old Street and Shoreditch, building on the 600 companies already established there. Other areas including King’s Cross, Stratford and Greenwich will increasingly come into their own.

London’s property market should also receive a boost from the international focus that will be on London during its Olympic year, reinforcing the growing domination of the central London office market by overseas investors. A recent Development Securities survey shows that 52% of City of London property is now owned by foreign institutions. In 1980 it was just 8%.

Key trends for 2012

• The London office map will see greater change as ‘place making’ crystallises for emerging hubs such as Farringdon, Kings Cross, Stratford and Greenwich.

• The Olympics will bring positive sentiment and reinforce London’s global appeal, bringing benefits for Central London real estate.

• 2012 will see an increased emphasis on refurbishments with more starts on site to plug the looming supply shortages, especially in the West End.

• The shake-out in the financial sector will continue in the early part of the year increasing the amount of under-used ‘grey’ space.

• 2012 will be the year the public sector starts to take decisive action to reduce costs and improve efficiency. The focus will be on operational efficiency to achieve savings first rather than a fire sale to generate revenue.

• Recent legislation allowing non law firms to offer legal services will impact on the thinking and real estate planning of the established players and stimulate demand from some new comers.

• The West End will see more pre-lets as the supply of new Grade A space falls.

A downbeat end to 2011 - with falling take-up, fewer investment transactions and increasing availability - came as no surprise against the deteriorating broader economic backdrop. With up to 200,000 jobs being shed in financial services worldwide in 2011, the City has found itself particularly vulnerable. Morgan McKinley’s November London Employment Monitor recorded a 29% month-on-month drop in available job opportunities for financial services professionals. And there is the prospect of more pain to come.

With economic growth likely to evaporate entirely, leasing markets across central London are likely to be broadly flat in 2012. However, with so many companies postponing relocation and expansion decisions a gradual release of pent-up demand in the second half of 2012 could see some improvement in take-up.