Commercial property rental prices have risen by 30 percent since 2000, according to the latest report by the appraisal team of JW Bermuda Realty.

Commercial property in Hamilton rented at an average of $42 per square foot in 1997 and only increased by $8 to an average of $50 per square foot by 2000.

Then it jumped to $55 per square foot in 2001, $62 in 2003 and an average of $65 by 2004, a study by the realty agency released yesterday said.

But appraiser Rob Newton said compared to residential prices, the increases were not nearly as great.

?There has been a noticeable increase in commercial office rents but that has not mirrored increases in residential values and that indicates how the commercial sector is more business- driven rather than ?oh my word I want that house?,? he said.

A recent sharp increase in the level of proposed office development makes it difficult to say what it going to happen to rents in the future, he said.

Previously, grade A and B office space was only procured on an ?as needs? basis by owner-occupiers such as ACE and Canon?s Court or on a joint venture basis or wholly or partly pre-leased basis such as RenRe?s Crow Lane headquarters.

?If space comes on stream at the present planned rates, we could potentially see the addition of between 350,000 to 500,000 square feet of new office space over the next two to two and a half years,? Mr. Newton said explaining that every 1,000 square feet of rentable office space could house between 6-8 people so 500,000 square feet could accommodate 3,000 to 4,000 workers.

He said that while demand continues to outweigh supply and push up rental prices, there is a possibility that some real estate might fall vacant as tenants move to newer, more efficient space or where speculatively developed buildings are poorly designed or in poorer locations.

?Both scenarios could potentially have a depressing effect on rental and capital levels alike for some properties,? he said, adding however that there is still room for landlords to rent outdated buildings which better fit the needs and budgets of some local firms and smaller international businesses.

?It is important to realise there are also different categories of office occupier,? he said. ?There will always be those local companies which would rather pay at the lower end of the rate scale $30-$40/square foot.

?They are not going to be the kind of people to leap into $65 square foot space and what that will do is ensure that the traditional office market continues to exist.?

Mr. Newton said the small size of Hamilton made Bermuda?s situation unique from other established financial centres because further development should always be encouraged, particularly when aimed at replacing outdated stock. It should however always be sustainable.

?Any significant net additions to the office supply chain, especially those linked to inward investments from overseas, should be viewed in the context of net demand increases on both the housing stock and the delicate services infrastructure ? not to mention traffic and parking issues,? he said.