A two-speed market is developing on the Oxfordshire commercial property scene.

While investment companies and pension firms are ploughing millions of pounds into buying prime developments, demand from tenants has slowed dramatically in the last year.

Richard Venables, associate director with Oxford property agents FPD Savills, said after an exceptional letting performance last year which saw 350,000 sq ft of new properties leased, demand had dropped back to more normal levels with 200,000 sq ft expected this year, reflecting economic conditions.

He added: "What we have got is a dichotomy. The investment market is doing well with high prices being paid for good income-producing developments.

"But the demand from occupiers is standard at the moment."

The analysis follows one of he biggest deals of the year in Oxford.

A property in St Aldate's has just been bought by Cheval Properties from Shell Pension Trusts for £7.1m.

The development, pictured, centrally positioned on the corner of Thames Street and Abingdon Road, covers 32,763 sq ft and units of about 3,000 sq ft are now being marketed to small organisations.

Richard Dawtrey, agency director at Oxford property agency Cluttons, which represented Cheval Properties in the transaction, said: "There are still deals being done and we are still busy but we have to work harder."

Generally, agents are upbeat about the future for the Oxfordshire property market.

Mr Venables added: "In Oxford, the building of new properties is contained, so the supply is contained.

"Oxford is faring much better than other areas -- we are a very solid bet for investors."