Companies subletting their premises could have a big impact on the future of new developments in Hamilton and their ability to find tenants, according to real estate and construction experts.

Yesterday The Royal Gazette reported that XL Capital Ltd. and American International Group (AIG) were looking to rent out part of their buildings, which would compete for tenants with the latest building projects in the City.

Alex DeCouto, president of the Construction Association of Bermuda, reckons the arrival of such prime office space on a market set to be deluged with new space can only mean downward pressures on rental prices.

"I can see why the decision was made, Bermuda needs to be as friendly as possible, especially to those companies that have made such a substantial physical investment on the Island, but this is likely to further decrease the likelihood of any significant commercial office construction starts for the next 18 to 24 months," he said.

Penny MacIntyre, manager of commercial sales and leasing at Rego Sotheby's Realty International, said that XL and AIG's ability to lease their space directly competed with new developments as it offers prospective tenants space that is already physically available.

"Often commercial tenants searching in the market are in need of space sooner rather than later and would prefer to avoid the possible risk of construction delays or a new development's financing concerns," she said.

But she added that XL and AIG were not the only concern as competition for the latest construction projects, with 'phantom space' occuring in the Island's commercial property market as other firms seek to move and sublet their premises in a bid to cut back on costs.

"Some companies are evaluating their rental costs and even have us quietly marketing their excess space to reduce overhead costs," she said.

"Some companies' senior management will even consider relocating to a new office in town for smaller space at lower rents if a prospective tenant wanted to sublet or take an assignment on their entire existing space.

"While some may see this as concerning, the practice of reviewing your current space is wise especially in this economic climate if it can mean the difference between keeping staff versus large unused office space."

A quick look on Coldwell Banker Bermuda Realty's website under the commercial rental section reveals a whole host of properties searching for new tenants, ranging from Sir John Swan's latest development at 141 Front Street to the Washington Mall Phase 3 retail outlet.

Prices at 141 Front Street range from $27,381 per month for 5,055 square feet of ground floor space to $91,825 on the ninth floor (11,019 sq ft).

Meanwhile Washington Mall phase three, which according to Washington Properties (Bermuda) Ltd.'s general manager Paul Slaughter is expected to be completed later this year and already has tenants lined up, is still advertising 14,841 sq ft of space of the first floor for $80,388 and 16,269 sq ft on the third floor at $94,902.

Other premises on the lookout for tenants listed on the website were the Argus Building, Orbis House and Powerhouse (both in Par-la-Ville Road) and Windward Place (on Hamilton Harbour).