Despite economic slowdown, Bahrain sees real estate growth

A report released by CBRE Group, the world’s largest real estate investment manager, predicts Bahrain’s gross domestic product (GDP) will slow down this year to 3.6 percent, down from 4.5 percent in 2014.

Yet, Bahrain’s slowdown has not impacted the kingdom's real estate industry, which remains strong in the small Gulf country.

Gulf News Journal sat with Heather Longden, the author of the first-quarter commercial and residential report for 2015, to find out more about this growing industry.

Can you give us a general summary of your findings in the report?

"CBRE Bahrain provides market commentary on a quarterly basis, including each sub sector, covering commercial office, retail, industrial and residential. In Q2 2015, CBRE highlighted the continued progression of developments in the hospitality and retail segments. In terms of hospitality, the luxury hotel set appears to be driving growth; and with regards to retail, the trend toward providing community services with out-of-town shopping centers has seemingly led to new projects entering the supply pipeline outside of the kingdom’s CBD, such as Galleria Mall in Zinj, and a First Bahrain Development food and beverage and retail offering in Janabiya.

"Demand for industrial facilities from international occupiers also continues to be consistent, with the level of sophistication improving in terms of services provided by such developments, to meet expectations of those firms operating on an international scale. The commercial office sector is still challenged by oversupply; however, this has led to more enterprising owners of commercial office towers providing attractive incentives, as well as better services to tenants in order to compete in a crowded market."

What should commercial office landlords be doing to compete in today’s market?

"Landlords demonstrating flexibility and a willingness to adapt to changing market needs, in what is an occupiers market, are continuing to fare better in today's challenging market. Significant incentives, such as extended rent-free periods, contributions to fit outs or providing pre-fitted/turnkey solutions are required, to differentiate from other offerings in a market segment experiencing oversupply. Local businesses are benefiting from aging or Grade B, sub-prime office space, with attractive low rents that allow for greater space and room for expansion while fitting within budgetary restrictions.

"This is not to say that new market entrants will be unable to attract tenants, but there is a clear divide between buildings that hit the right note, in terms of efficient, affordable office space that meets occupier requirements and offer facilities to end-users on site or within the vicinity and those that have yet to tap in to this trend."

Is the country still feeling the impact of the political unrest of 2011?

"The real estate sector in the Kingdom of Bahrain continues to witness steady growth and a return of positive market sentiment, following the difficulties it has faced, as a result of the global financial crisis and the political unrest of recent years. Although still facing challenges of oversupply, particularly within the commercial office sector in the CBD, a recent boost in the level of development in the retail, hospitality and industrial sectors, and mixed-use projects show promise for Bahrain’s future and that the kingdom is adapting to changing market needs with a more strategic approach to development." 

What has slowed down Bahrain's real GDP growth in 2015?

"Our sources, which include the Bahrain Economic Development Board, suggest that slowdown in the kingdom’s economic growth is principally a result of falling oil revenues and cuts in government spending."