ONE of the island's top commercial realtors has this week reported a seven-year low in demand for office space, adding that "sensible domestic policies" are key in ensuring international companies don't desert Bermuda.

Coldwell Banker Bermuda Realty's Graham Smith echoed the words of residential realtor Buddy Rego, explaining that landlords will have to accept lower rents for office space ¿ and higher vacancy rates.

He warned of possible delays in commercial construction projects thanks to strict financing requirements brought on by the credit crisis. However, he has noted an increased interest in modern, sustainable buildings ¿ meaning that landlords with older office buildings on the market may suffer.

"There is some evidence that some projects, especially those that are at excavation or foundation stage at the moment, will be delayed until such time as sufficient tenants are secured to satisfy today's understandably stringent financing requirements," Mr. Smith said.

"Landlords with space on the market over the next year or so may have to accept slightly lower commencement rents and remain patient for the short term due to lower demand levels than we have seen over the past seven years. This should create slightly higher vacancy rates than we have become used to, especially in lower quality buildings as tenants look to reside in newer more sophisticated, 'green' buildings that are more energy efficient."

Market research from Coldwell Banker Bermuda Realty indicates that the current lull in demand for office space may reverse towards the end of 2009 as reinsurance companies' results start to improve. Of course, this depends on whether international businesses are still based in Bermuda by then - which is where domestic policies and marketing strategies come in, according to Mr. Smith.

"Through this challenging time, it is my view that it will vitally important for Bermuda to enhance ¿ through creative international marketing strategies and sensible domestic policies ¿ its reputation as a place where mainstream international companies feel completely comfortable doing business," he said.

"With substantial office developments coming on line in the next two to three years, Bermuda is well positioned to capitalise on new and existing company growth as the worldwide economy starts steady growth through 2009 and beyond."