The industrial sector in Bahrain is set to see a growth of 20% this year, thanks to the flow of the FDIs in the country and proactive policy to absorb the flow of investments in this sector, according to a report.
The report said that the industrial property likely to be a key future real estate sector as Bahrain continues to diversify away from a hydrocarbon based economy.
“The industrial sector, which currently accounts for 17% of the nation’s GDP, is targeting annual investment growth of 20% as the government seeks to take advantage of increased levels of Foreign Direct Investment,” Stefan Burch, Regional Head of Strategic Consultancy at Cluttons in a report said released on Sunday.
The Report said that in existing industrial areas land sales have historically been good. Bahrain Investment Wharf (BIW) sold all but two plots reflecting a 98% take-up, Salmabad is nearly 100% full and Bahrain International Investment Park (BIIP) appears to have approximately seventy companies signed up on land plots.
“Cluttons believes that subsidised land will continue to generate demand from investors in contrast to those areas that are not subsidised. As with all real estate downturns, catering to end user demand remains critical,” Tim Glover, CEO, Cluttons Bahrain added.
Bahrain-based Cluttons, the real estate specialist that has enjoyed a dedicated Middle Eastern presence since 1976 and has the largest footprint in the region, released their first Quarterly Market Update for 2011.
Released at a critical juncture for the MENA region that experienced political instability in many countries, this report aims to shed light on the impact this has had on Bahrain’s real estate sector.
Tim Glover, CEO, Cluttons Bahrain commenting on the economic viability of the Kingdom’s real estate future said that Bahrain’s short term economic fortunes rely on a speedy resolution to the current unrest.
“I know that there is a determination in the current government and amongst the people of Bahrain to pull together and recreate the economic prosperity of recent years,” added Glover.
The Report, which is prepared by Stefan Burch, Regional Head of Strategic Consultancy at Cluttons, said that even though the demonstrations in Bahrain have been peaceful in comparison to those in Egypt, Tunisia and Libya they have, nonetheless, had a negative impact on the nation’s economy.
“On the upside the Central Bank of Bahrain has reported that there has been no major flight of capital from the country as a result of the recent unrest. Accordingly they have announced that the $1 billion bond issue will go ahead when costs are reasonable,” added Glover. “Coupled with oil prices exceeding $100 a barrel for the first time since Q3 2008, government revenue is set to soar,” he added.
The Report added that the recent unrest in the country has led to a period of stagnation in the office market as tenants and landlords wait to see what the effect of the political uncertainty will be.
“In addition to these events, high levels of Grade A and B office pipeline supply continue to fuel the trend of falling rental values. Given the high levels of supply in the market, many landlords have been forced to reduce quoting rents and offer incentives in order to secure transactions,” Burch said.
Current levels of residential property stock remain high while the future pipeline supply continues to outstrip potential demand. In the short term, there has been a reduction in residential property transactions as purchasers wait to see what the longer term affects will be. “Cluttons believes that there could be a shift in the focus of expatriates from the west to the east of the island. This is a move away from the traditional expatriate neighborhoods,” added Burch.