Bermuda is facing an over-supply of office space and residential units — and there will be a significant slowdown in the construction of both areas in the foreseeable future.

That is the view of Alex DeCouto, president of the Construction Association of Bermuda (CAOB), who was writing in the Association's latest newsletter, saying that several developers saw the market for more office room and rental units to meet the needs of international business in 2006, but following the global economic crisis, the industry now found itself in a position of over-supply.

Mr. DeCouto added that no new projects in the public and private sector were close enough to getting started to save the construction industry from a "severe and sudden downturn" in the fourth quarter of this year.

"Although 2008 has proven to be a bumper year for the industry, a lag in new projects starting will suck the industry into the same storm that has enveloped the rest of the world," he said.

Mr. DeCouto said that in spite of Government figures for 2008 being revised down from mid-year bulletins for value of new developments begun during last year, there were massive levels of construction starts between the third quarters of 2007 and 2008, resulting in a record year for the industry in terms of value of work put in place of almost $400 million.

But he warned that despite appearing to be busy, the sector had experienced some "severe turbulence" in recent months, with a surplus and then shortage in skills in quick succession as projects start and finish at the same time, believing the situation will get worse before it gets better.

"Property development is a risky game," he said. "The elapsed time between identifying an opportunity and getting a finished project to market can be the better part of five years, if you're lucky.

"This can result in problems when there are significant changes to the economy during the intervening term."

Mr. DeCouto said that while the construction industry had historically seen work distributed across a number of sectors, including residential, commercial, Government and tourism, however, he did not envisage much office building in the short to medium-term, particularly compared to the past five years.

Similarly, he reckons even the marginal fall in expatriate workers already experienced had a significant effect on rents and would lead to a corresponding drop in new residential construction.

Mr. DeCouto said that hotel developers would have to be brave to build new resorts with arrivals to the Island down 20 percent and no telling what those numbers would be at time of completion.

He said that Government had demonstrated a willingness to step up its spending, with one of the biggest projects in the country's history in the form of the King Edward Memorial Hospital public-private-partnership scheme, the Causeway and the Hamilton Waterfront, among others.

But he added that neither new public- or private-sector developments were ready to begin in time to prevent a major downturn at the end of 2009, citing the Corporation of Hamilton's new 30,000 square-foot depot project, with 13 general contractors prequalified to bid for it as an example of how tight the market was at the moment.

"I wish I could paint a rosier picture, but I think that is the reality," said Mr. DeCouto. "There is a dearth of meaningful projects on the open market to bid at the moment, offering a clear indication that a slowdown is imminent.

"The silver lining to the cloud is that, in 18 month's time, the industry should be more lean and ready to deliver when the economy does turn back around."