London Central Portfolio (LCP) says average rental prices for re-lets - older properties being let to new tenants - have fallen by 1.2% during the second quarter of 2016.
The firm says that new furbished properties have recorded positive rental increases during every quarter since January 2015.
During Q2, however, growth has been subdued at just 0.3%.
LCP says this is down to heightened stock levels, which have increased by over a quarter in the last three months, according to Lonres.
According to LCP, Marylebone, Fitzrovia and Mayfair are the best performing micro-markets.
Meanwhile, in Chelsea and Earl's Court average rents in one and two-bed flats have dropped by over 10%.
The report shows that renewals for existing tenancies have bucked the trend, with average rental values increasing by 3.3% in the last quarter.
Tenant demand in Prime Central London remains strong - for one and two-bed properties the average void period is now just 23 days.
"The overall suppression in rents reflects a market dynamic which was conspicuous during the Credit Crunch, as tenants capitalise on economic uncertainty to leverage up their bargaining power," says Naomi Heaton, chief executive of LCP.
"This has been compounded by companies cutting their relocation budgets in the face of global instability and, in some cases, delaying relocations in the run up the EU referendum."
She says that in order to avoid void periods, landlords and agents may need to be more flexible to accommodate tenants' higher negotiating power.
Heaton notes that despite the economic uncertainty, it's not all bad news.
"Newly refurbished properties, in areas with good transport links and particularly around Cross Rail, continue to attract tenants willing to pay premium prices," she says.
"Landlords can expect an improved picture next year as the market rallies and rents increase to counter the tax and Brexit headwinds."
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