The wave of new companies that have flocked to Bermuda in the wake of the September 11 could cause a very tight commercial rental market by the end of the year and into 2003, according to realtor Graham Smith of Coldwell Banker Bermuda Realty. He said there was a demand for 120,000 square feet of office space, which came despite tens of thousands of square feet being freed up after ACE Ltd., XL Capital and Bermuda Commercial Bank moved to new headquarters. The price range for top quality commercial rental is between $45 and $60 per square foot.

Secondary rents are between $25 and $40 per square foot.

Mr. Smith said it was an excellent time for investors to consider investing in building new office space to ease the heightened demand.

"It is possible that the rapid growth of these new companies will find most of the available inventory taken up over the next six to nine months and we could be seeing a very tight market by the end of 2002," Mr. Smith said in his newsletter "Commercial Market Update".

And he said that with very little office development under construction at the moment, the market should remain constricted into 2003.

He said: "It appears to be an excellent time for developers to consider the feasibility of investing in new office buildings in the city of Hamilton as rental rates for good quality space remain buoyant."

He said that several other companies, not all in the reinsurance business, have been establishing a presence in Bermuda, and he pointed to the recent decline in the stock market prompting an increase in hedge fund business in Bermuda and around the world.

"All of those factors contribute to an increase in demand for prime office space, both temporary and permanent," he said. And he said that the inventory created by ACE Ltd and XL Capital moving into their new world headquarters combined, and about 40,000 square feet freed up with the decline of the telecommunications industry was still available.

He said that the opening of Bermuda Commercial Bank's new headquarters on Victoria Street had freed up a further 45,000 square feet of commercial property.

He said that location continued to be a "very important factor" in the new market, with strong demand for prime waterfront property in the south-west corner of the city and on Pitt's Bay Road.

And he revealed that Coldwell Banker Bermuda Realty had been involved in leasing over 65,000 square feet of space over the past 12 months.

He also said that demand for retail space continued to decline with requests for space on Reid, Church, Queen and Burnaby Streets declining at a lower rate than Front Street. Available retail space is increasingly "reflecting the continuing weakness in tourism".

But he added that demand for good quality, accessible warehouse/storage space remained buoyant with very little supply in that segment of the market.