Bahrain “will not regain its status as the region’s leading financial centre” amid fierce competition in the Arabian Gulf, thus hurting its property market, says the latest country report by Business Monitor International (BMI).
The country’s historical position as the regional centre for Islamic finance is being challenged by Dubai, while banks in Abu Dhabi, Qatar and Saudi Arabia have been competing strongly against the banking sectors in Bahrain and Dubai, according to the market research company.
“As a major driver of real estate investment in Manama, the failure of Bahrain to regain its status will drag on demand for major new office space and high-end residential building,” said BMI.
Even so, Bahrain’s construction sector is set to continue growing at about 3.6 per cent over the next four years, it said. And public sector investment will finance infrastructure projects.
Bahrain plans to spend US$4.4 billion of the $10bn allocated to it under the so-called “pan-Arab Marshall Plan” agreed with other GCC governments.
About $2.2bn of this amount is being earmarked for public housing projects, with the rest allocated to energy and water projects.
However, the report said it was “unclear how much of the money pledged by the other members of the GCC will reach Bahrain, especially given the growing tensions within the group”.
It pointed to tensions between Qatar and Bahrain as a threat to a delayed causeway project between the two countries.
But it said that government spending on a number of large-scale projects was likely to take place, including the $4.8bn expansion of the Bahrain Petroleum refinery, a $2.2bn project to add a sixth production line to Aluminium Bahrain’s smelter and an expansion of Bahrain International Airport.
According to CBRE’s second-quarter report on Bahrain, rents remained flat at between seven and eight Bahraini dinars (between Dh68 and Dh78) per square metre for international-standard Grade A offices.
Market demand also remains limited. “Newer stock and office developments that have failed to carve out a niche in less popular locations are struggling to attract occupiers,” said Steve Mayes, CBRE Bahrain’s director of research.
Nevertheless, a revival of retail and hospitality projects was under way, he said.
In the retail sector, the Dadabhai Group is set to open the 42,600 square metre Galleria Mall in Zinj, and Maalem Holding will soon open a three-level, 18-unit development in the Seef district of Manama.
In the hospitality sector, hotels enjoyed their busiest period of the year in April during the Formula One Grand Prix, with occupancy rates between 90 and 100 per cent. Two major new hotels opened before the Grand Prix – the long-awaited Four Seasons at Bahrain Bay and the Art Rotana at Amwaj Islands.
A new Rotana hotel is due for completion in Downtown Manama by the end of the year.
In May, Emaar Hospitality Group said it would build two new hotel resorts at the Marassi Al Bahrain community in Diyar Al Muharraq.
The Address Marassi Al Bahrain hotel will have 110 rooms and 17 suites, as well as 130 serviced apartments.
The Vida Marassi Al Bahrain will have 160 rooms and 140 serviced apartments.
mfahy@thenational.ae
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