Boston, MA -- (SBWIRE) -- 02/08/2013 -- The Bahrain Real Estate report examines the commercial office, retail, industrial and construction segments throughout the kingdom in the context of ongoing political stability issues in a market already characterised by oversupply.

With a focus on the three principal cities of Manama, Riffa and Muharraq; the report covers rental market performance in terms of rates and yields over the past 18 months - with newly collected data charting the sector over H112 - and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of the government-fed construction boom as the commercial real estate market continues to suffer the fallout from the global financial crisis and political unrest. It has been one of the slowest Gulf Cooperation Council economies to recover from the crisis and the protests mean that economic growth is likely to be slow throughout 2012 and into 2013. In the real estate sector this has translated into falling rents and an endemic oversupply of rental space.

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In spite of these challenges, elevated oil prices and higher oil production are likely to help build an economic recovery over the coming years, though it will be slow in coming. 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 the rise in oil prices that is going to fuel economic growth. Since oil makes up 80% of Bahrain's export income, GDP growth is extremely sensitive to movements in the price of oil. As a result, 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.

Key Points

- Elevated oil prices, a ramp up in government spending, and financial support from Saudi Arabia should help bolster growth throughout 2012 and into 2013. That said, a weak outlook for the domestic tourism and financial services sectors will ensure that a return to pre-crisis rates of real GDP growth remain off the cards in the near term.
- Bahrain's reputation as a stable and welcoming location to do business in the Gulf has suffered irreversible damage as a result of the volatile political climate. At the moment, it remains to be seen if Manama will be able to compete with Doha and Dubai in attracting investment into the all-important hospitality and financial services industry.
- While we expect growth to rebound slightly in 2012, we stress that the economy's medium-term outlook remains contingent upon a lasting solution being found to the current political crisis. Unfortunately, we maintain our relatively guarded outlook on the prospects that the government and opposition can come to some form of agreement in the near term.

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