Boston, MA -- (SBWIRE) -- 06/19/2013 -- The Bahrain Real Estate report examines the commercial office, retail, industrial and construction segments throughout the country in the context of 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 H212 - 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. 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 exportoriented oil sector.

Key Points

We expect Bahrain's political crisis to rumble on over the coming months as a fundamental resolution continues to prove elusive. While the risk of ongoing public protests remains elevated we believe the government's firm grip on power should see its ability to form, pass and implement its own policy programme remain intact. Nevertheless it is our view that elevated risk aversion will continue to undermine growth within Bahrain's construction sector and keep a lid on foreign investment. Indeed, we expect gross fixed capital formation, and by extension the construction industry, to underperform the wider economy over the medium term as public spending constraints, inhibitive project financing conditions and a depressed tourism sector contribute to lacklustre growth. Having expanded by an estimated 3.9% in 2012, we are forecasting the construction sector to grow by a still relatively modest 4.0% in 2013 - well below the levels seen between 2001 and 2008.

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