An exodus of hedge funds from Mayfair in Central London, the world’s most exclusive office district, has cut the cost of renting premises in the area by half in the past two years.

Property managers have reported that office lets in the “hedgie” heartlands of Mayfair and St James have fallen from a peak of £120 per sq ft in mid-2007 to as little as £55, as the downturn has claimed many of the area’s former occupants. For 5,000 sq ft — the typical size required by the average hedge fund — the fall means that quarterly rents for some of the plushest offices in London have dropped from £144,000 to £69,000, according to King Sturge, the property agent.

James Beckham, partner at King Sturge, said: “Lots of hedge funds are out of Mayfair, which has resulted in a rapid fall in rents. The number of vacant offices here has also risen.”

In 2007, King Sturge let 870,000 sq ft of office space in 77 transactions. This figure fell to 595,000 sq ft in 48 transactions last year.

Neil Prime, a director at Jones Lang LaSalle, another agent, said: “Hedge funds do not seem to be moving elsewhere; they are just vanishing. You might still get £90 a sq ft in the best building in Savile Row, but most have fallen dramatically.”

Property agents in Switzerland might argue that hedge funds have not vanished altogether, but are moving there instead. Larry Levene, of Alpine Homes International, the Swiss-based agent, held a relocation event last week that was so busy “we had to turn people away”. Mr Levene said: “We have seen an upsurge in interest from City workers, including hedge fund managers, who are looking to relocate.”

However, in London there is evidence that the offices left vacant by the likes of Peloton Partners and Bear Stearns in the most sought-after streets of W1 are starting to fill up. King Sturge said that new hedge fund start-ups have already begun to take advantage of the lower rental costs, as well as the luxury add-ons, such as plasma flatscreen televisions, leather sofas and wireless technology, left behind by their predecessors. These are new start-ups with two or three partners, many of whom are ex-bankers or former employees of larger hedge funds who lost their jobs, agents say.

Andrew Barnes, partner at King Sturge West End, said: “Many of the original occupants fitted out the space at a cost of £100 to £150 a sq ft with the latest gadgets and plush furniture, but then hardly used them. The new tenants get the benefit of a luxury fit-out thrown into a deal that already looks like a bargain.”

Landlords are accepting the lower rents to avoid being charged rates for empty offices that can cost about £25,000 a quarter. However, tenants must agree to short leases.

Mr Barnes said: “Landlords would rather have some rental income coming in than none at all, so they are offering lets at the low levels, but only for a year or two, by which time the market may have picked up again. Tenants also face uncertainty, so are happy to accept shorter leases.”

Elsewhere in W1, other companies are upgrading. King Sturge said that in the past year digital media companies had used the downturn in rents as an opportunity to expand, although they were staying put in their traditional Soho and “Noho” haunts.

Yet if the new mood in Mayfair is one of frugality, the most popular bars and pubs have not noticed. The manager of The Punch Bowl, on Farm Street, said: “We have always had a mix of hedge fund managers, property types and tourists here. If they have all left, I haven’t noticed.”