| 09 Nov 2009 |
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Report on Bahrain's real estate market outlines impact of global recession
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Manama, Bahrain, 9th November 2009: DTZ, A top global real estate advisory firm, today released its Bahrain market report, providing detailed insight into the impact of the global economic downturn on the Kingdom's real estate sector. The comprehensive report provides fresh information on the freehold and leasehold residential, retail, office and industrial sectors.
Residential Sector
The report found that following a four year period of sustained growth, due to reduced levels of liquidity and low investor confidence, Bahrain's residential sector underwent a significant correction from Q3 2008 to Q3 2009, with transactions in Q4 2008 down 40% on the previous quarter and 52% year on year.
The freehold "Off Plan" sales market has virtually disappeared whilst DTZ suggests completed schemes should secure sales at corrected prices.
Robert Addison, DTZ's Director and Country Manager of DTZ Bahrain comments on the residential sector trends:
"We have moved into an era of extreme caution on the part of purchasers, many of whom have entered contracts that commit them to phased payments, against pre agreed dates. However given various delays DTZ believes that this could herald a move towards phased payments, against construction milestones or much smaller pre construction payments (deposits) with the balance on delivery of the finished project."
Large volumes of new stock coupled with reduced demand have weakened the leasehold sector for apartments, especially Juffair and Amwaj Islands being particularly susceptible with rental levels down between 15-20% from their peak in Q2 2008. With limited signs of recovery in freehold sales, the report predicts ongoing downward pressure on apartment rents as landlords aim to secure income from units they cannot sell. With an estimated 23,000 apartments due for delivery from master planned schemes by 2012, the report predicts recovery will be slow.
Villa rents have been more resilient due to an under supply of quality product, notably in Saar, Budaiya and Janabiya, with prime rents on average BD 1,000 pcm for three bedroom villas to BD 2,5000 pcm for five bedroom villas.
Retail Sector
The report outlines key drivers of a growing population, increased income and proximity to the Eastern Province of Saudi Arabia contributing to the growth in Bahrain's retail market from 185,000sq m GLA in 1999 to 510,500 sq m GLA today. New retail development across Bahrain for the next five years (without factoring in delays or cancellations) is estimated at 412,000 sq m GLA, representing an 80% increase on existing stock.
Office Sector
DTZ has experienced a 23% drop in the number of enquiries for office space, reflected by the reduced number of Financial Services start ups. However enquiries from Government bodies and Professional Services companies have increased, as anticipated during a recession.
The report notes that 270,000 sq m of planned office space has been delayed indefinitely or cancelled in the last 12 months, with a further 50,000 sq m due for delivery in the past 12 months, pushed back to Q4 2009 and beyond. The pipeline for office development stands at 520,000 sq m by 2012, which would represent a 90% increase on existing stock if all were delivered, an outcome which DTZ views as being unlikely.
Industrial Sector
DTZ anticipates the backdrop of government investment into both heavy and light industry will lead to significant development activities within the industrial sector, which is currently under supplied.
With an increasing population and the need for more sophisticated logistics, the report asserts that the warehousing and logistics market across the Gulf is still relatively immature and underdeveloped, with limited speculative development activity, and thus is a potentially attractive development opportunity.
Commenting on the report's overall findings, Robert Addison, said:
"Bahrain is key market for DTZ and we are delighted to share our findings with the community. Whilst the future remains unclear, drivers for value are beginning to re-emerge and over time are likely to lead to a stronger, more resilient property market in Bahrain."
-Ends-
DTZ is the most established firm of real estate advisors in the Middle East, with it's first permanent operations beginning in 1975. Today, DTZ has a presence in six GCC locations (Abu Dhabi, Dubai, Bahrain, Kuwait, Qatar and Saudi Arabia). Each DTZ office provides a full range of real estate services staffed by qualified expatriates and experienced Nationals.
About DTZ
DTZ is a leading global real estate adviser with over 10,000 staff operating under the DTZ brand across 148 cities in 43 countries providing solutions for clients around the world. Its client-focused activities range from high quality capital market solutions, to cutting-edge occupier-led property services and advice. The comprehensive service offering across Europe, Middle East & Africa (EMEA), Asia Pacific and a growing presence in The Americas is based upon detailed local knowledge backed by first-class research. With its full-service expertise spanning all real estate sectors, DTZ offers a global solution to meet each client's particular property-related investment and business needs. The parent company, DTZ Holdings plc, has been quoted on the London Stock Exchange since 1987. www.dtz.com
For a full copy of the report, further information or interview with Robert Addison, please contact:
Kate Bermon
Acting Regional Marketing Manager
Tel: +971 2 667 4492
Email: kate.bermon@dtz.com
© Press Release 2009
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