Boston, MA -- (SBWIRE) -- 07/06/2012 -- The Bahrain Real Estate report examines the Commercial Office, Retail and Industrial 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 the rental market performance in terms of rates and yields over the past 18 months 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 on a market already characterised by oversupply as the commercial real estate market continues to suffer the fallout from the global financial crisis and unrest that swept through the country in early 2011. It has been one of the slowest Gulf Cooperation Council (GCC) economies to recover from the crisis and the protests mean that economic growth is likely to be slow throughout 2012. 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.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 exportoriented oil sector.
- A general view that rents will stabilise and at least move sideways, if not improve slightly, during 2012.
- Government stimulus programmes and most notably the commitment to invest US$3.2bn in the construction of 30,000 new residential units by 2016.
- A more pronounced regional crisis stemming from an uptick in tensions between Iran and the West could see risk premiums spike higher, particularly for Bahrain.
- A marked drop in oil prices; concomitant with a slowdown in growth in Europe, the US and China; would pose a significant risk to the country's short-term growth outlook and is likely to lead to a marked deterioration in the country's balance of payments and fiscal dynamics.
- It remains unclear what impact 2011's political crisis will have on Bahrain's long-term economic outlook. Should investors begin to reassess the costs of doing business in the country and begin relocating to Dubai or Doha, Bahrain's growth outlook would suffer accordingly.
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