<!—->

Bahrain looks set to be cushioned from the blow of prolonged economic challenges caused by slumping oil prices by continued infrastructure investment from the GCC aid fund, according to  CBRE.

Its Q4 2015 Bahrain MarketView said that despite negative impacts of the on-going oil slump, the real estate sector in Bahrain has proven resilient, with solid returns still considered achievable.

It added that this was underlined by the 7 percent growth achieved within the construction sector during early 2015, as a raft of new development projects were launched across all real estate asset classes, but notably in the retail, hospitality and residential sectors. 

Steve Mayes, director, Middle East Research, CBRE Bahrain said: “This growth was underpinned by investment in large scale infrastructure projects, supported by the $10 billion GCC aid fund, including the multi-billion dollar Bahrain Airport expansion and the expansion of government affordable and social housing schemes, are also at the forefront of this trend.”

The report said the retail sector continues to dominate real estate activity in Bahrain, with Q4 2015 witnessing several significant openings and new announcements.

Diyar Al Muharraq, in a joint venture with Emirati developer Eagle Hills, announced the launch of Marassi Galleria shortly after the opening of Dragon City at Diyar Al Muharraq.

“Community malls serving new residential districts continue to emerge as a dominant theme and nowhere is this more evident than in New Janabiya where no less than four separate malls under development or planned,” said Mayes.

According to the report, Q4 2015 heralded a period of consolidation in the hospitality sector, with no major new announcements but steady progress made towards the launch of two new developments in early 2016. The Rotana Downtown in central Manama, along with Wyndham Grand at Bahrain Bay will add a further 509 rooms to the 5-star hotel stock.

CBRE said that with the retail and hospitality sectors rapidly approaching saturation point and the commercial office market still labouring amid weak demand, the residential sector may present opportunities for investors to leverage key advantages that Bahrain enjoys over other GCC markets.

According to the recently published InterNations Expat Insider Survey 2015, Bahrain ranked highest of The Gulf countries for lifestyle, cost of living and education, at 17th globally ahead of the UAE, 19th and Oman, 24th.

Mayes said: “If you also consider that real estate costs per square metre for apartments in Bahrain average $2,072 and $5,037 in the UAE and that transaction costs are significantly lower in Bahrain, a case can be made for the residential sector offering potential investment opportunities.”

The commercial office market continues to face stiff challenges with downside risks again appearing on the horizon, the report added.

It said the oil price slump is likely to lead to consolidation of space requirements in the hydrocarbon sector, with the real potential for current expansion plans to be sidelined.

Budgets to fund Ministry office projects may also be affected by the widely discussed cuts in short to medium term government spending.