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Bahrain Real Estate Report Q4 2011
Business Monitor International, Oct 2011, Pages: 52
Business Monitor International's Bahrain Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Bahrain's Real Estate industry.
The commercial real estate market in Bahrain remains depressed. It suffered badly during the global financial crisis and, to date, has been the slowest of the GCC countries to recover. In fact, throughout 2011 rents have continued to fall, as the oversupply of space remains endemic.
It is quite likely that, in purely economic terms, Bahrain may experience a recovery over the next two to three years. If it does so, the GDP growth will be achieved entirely on the back of a positive trend in oil revenues. There is some irony in the fact that the very same unrest that is causing so much damage to the wider economy in the MENA region is also responsible for a pick-up in oil prices. Since oil represents 80% of Bahrain's export income, GDP growth is extremely sensitive to movements in the price of oil.
Hence, while BMI are forecasting anaemic GDP growth of just 0.5% for 2011 and 1.2% in 2012, BMI expect oil production will almost single handedly lift growth to an average of 7.0% for the 2013-2015 period.
Some of the key opportunities in the real estate market are:
- A general view that rents will stabilise and at least move sideways, if not a little better, during 2012.
- An increase in oil revenues may flow through to the wider economy and help to lift domestic demand out of the doldrums.
- Government stimulus programs and most notably the commitment to invest US$3.2bn in the construction of 30,000 new residential units by 2016.
- An earlier than expected and/or a more comprehensive than expected settlement of the political crisis would return confidence to the commercial real estate market.
The key risks for the real estate market include:
- As a direct result of the political crisis:
Tourism arrivals contracted by more than 25% in Q111 as compared to a year earlier. Bahrain's position as a financial centre has been, perhaps irreparably, damaged. It was already facing completion from Dubai, Doha and Abu Dhabi. There are reports that come businesses have already moved from Bahrain to one of those other cities.
- The consequence has been a decrease in demand for space in both the financial services and tourism sectors, even as new developments bring additional space online.
- Very high vacancy rates and a lack of growth in the domestic economy mean that the oversupply of commercial space will only be absorbed slowly. In the meantime, it is a tenants' market.
- The political crisis could worsen or at least remain unresolved for quite some time. It is difficult to be optimistic about the short term prospects for Bahrain's commercial real estate market. The longer-term outcome will depend on Bahrain achieving a level of economic growth outside the export oriented oil sector.
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