Retail rents are expected to drop by 20 per cent by the end of 2010 as recessionary conditions force landlords to offer stores better terms.

Rents are likely to have fallen by 11 per cent by the end of this year, research by property firm Colliers CRE showed.

Some landlords are offering six-year rent-free occupation, so dire is their situation. Rental values are not expected to return to growth until 2012.

The downturn has forced retailers including MFI, Woolworths and Birthdays out of business and landlords have been left with a glut of unwanted space.

Retailers that are still on the expansion trail are demanding lower rents and concessions such as long rent-free periods.

Big property groups such as Land Securities, British Land, Hammerson and Liberty International have all had to write down the value of their retail assets by billions of pounds.