Key Insights On The Real Estate Sector Of Bahrain The prospects for Bahrain's commercial real estate sector can best be described as depressing. Economic growth has slumped ' in the wake of the global financial crisis and the problems of Dubai World ' and is not likely to accelerate anytime soon. A major constraint to growth is the widespread perception that Bahrain has been overbuilt ' while the recent performance of the local stock market suggests that there is a general risk aversion on the part of investors. The geography of Bahrain is such that commercial tenants have the opportunity to relocate to new premises between the three cities for which we have gathered data ' Manama, Muharraq and Riffa. A glut of commercial property hangs over the entire country. Vacancy rates estimated by our in-country sources vary markedly ' from 10% in some sub-sectors to over 50% in others (including offices in Manama). However, rental rates fell across the board in 2009. Our sources do not expect that rental rates will recover ' anywhere in Bahrain ' prior to 2011. In this respect, Bahrain differs markedly from other markets in the region such as Qatar. Depending on the sub-sector, rental yields moved quite substantially over the last year ' either in an upwards or a downwards direction. In particular areas, it seems that some landlords were forced to sell assets at firesale prices, with the result that yields rose even as rental rates were slipping. At present, there is a wide range of rental yields across the entire commercial real estate sector. Looking forward, we expect that yields will converge. As a result, yields in 2014 should be broadly similar to what they were in 2007 and 2008. Interviews with our in-country sources were conducted in mid- March 2010. Key Features Of This Report This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. Once again, the questions that we seek to answer for each country remain as follows: what are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term' What are the main constraints that they face' What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries' For Q3 we have introduced a very substantial new improvement to the reports. We have incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors ' office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.

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Bahrain Real Estate Report Q3 2010
Published on June 2010
Report Summary
Key Insights On The Real Estate Sector Of Bahrain
The prospects for Bahrain's commercial real estate sector can best be described as depressing. Economic growth has slumped ' in
the wake of the global financial crisis and the problems of Dubai World ' and is not likely to accelerate anytime soon. A major
constraint to growth is the widespread perception that Bahrain has been overbuilt ' while the recent performance of the local stock
market suggests that there is a general risk aversion on the part of investors.
The geography of Bahrain is such that commercial tenants have the opportunity to relocate to new premises between the three cities
for which we have gathered data ' Manama, Muharraq and Riffa. A glut of commercial property hangs over the entire country.
Vacancy rates estimated by our in-country sources vary markedly ' from 10% in some sub-sectors to over 50% in others (including
offices in Manama). However, rental rates fell across the board in 2009. Our sources do not expect that rental rates will recover '
anywhere in Bahrain ' prior to 2011. In this respect, Bahrain differs markedly from other markets in the region such as Qatar.
Depending on the sub-sector, rental yields moved quite substantially over the last year ' either in an upwards or a downwards
direction. In particular areas, it seems that some landlords were forced to sell assets at firesale prices, with the result that yields rose
even as rental rates were slipping. At present, there is a wide range of rental yields across the entire commercial real estate sector.
Looking forward, we expect that yields will converge. As a result, yields in 2014 should be broadly similar to what they were in 2007
and 2008.
Interviews with our in-country sources were conducted in mid- March 2010.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate
sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets.
Once again, the questions that we seek to answer for each country remain as follows: what are the main issues that will matter to
actors in and around real estate development in the country concerned, both over the long and the short term' What are the main
constraints that they face' What are the key insights that one garners when one compares the real estate sector of the country
concerned with its peers in other countries'
For Q3 we have introduced a very substantial new improvement to the reports. We have incorporated data and qualitative
observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a
much clearer picture of the balance between demand and supply in each of three main sub-sectors ' office, retail and industrial. We
have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.
Table of Content
Executive Summary 5
SWOT Analysis ........ 7
Bahrain Real Estate And Construction Industry SWOT 7
Bahrain Economic SWOT ........... 8
Bahrain Business Environment SWOT ......... 8
Real Estate Investment Trusts . 9
Table: REIT Returns ' FTSE EPRA/NAREIT Global Real Estate Index And Components, 2007-Q110 (% change) ......... 10
Real Estate Market Overview . 13
Bahrain Real Estate Report Q3 2010 Page 1/4

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Table: Bahrain's Real Estate Market ' Rentals, 2008 And 2009 (m²/month, US$) ......... 14
Table: Bahrain's Real Estate Market ' Net Yield, 2008 And 2009 (%) ......... 14
Table: Bahrain's Real Estate Market ' Terms Of Contract/Lease 15
Table: Bahrain's Real Estate Markets ' Available Space (m²) and Vacant Space (%) ... 15
Forecast Scenarios ................ 16
Real Estate Outlook . 16
Table: Bahrain Real Estate Market ' Rentals (m²/month, BHD) .. 18
Table: Bahrain's Real Estate Market ' Net Yield, 2008-14 (%) ... 18
Construction And Infrastructure Outlook .. 19
Table: Bahrain's Construction And Industry Data And Forecasts, 2008-2014............... 19
Macroeconomic Outlook ........... 21
Table: Bahrain ' Economic Activity, 2007-2014 ........ 23
Business Environment .......... 24
Real Estate/Construction Business Environment Rating .............. 24
Table: Middle East And Africa Business Environment Ratings.... 24
Bahrain's RECBER.. 25
Middle East Project Finance Ratings ........ 26
Table: Design And Construction Rating .... 27
Table: Commissioning And Operating Rating ............ 29
Table: Overall Project Finance Rating ...... 31
Middle East And Africa's Business Environment Overview ......... 32
Bahrain's Business Environment ............... 34
Table: BMI Business And Operational Risk Ratings ... 34
Legal Framework..... 36
Table: BMI Legal Framework Ratings ...... 36
Infrastructure ........... 39
Table: Labour Force Quality .... 41
Market Orientation .. 41
Table: Foreign Direct Investment Inflows Into Middle East And Africa, 2006-2008 ...... 43
Table: Trade And Investment Ratings ........ 45
Table: Bahrain's Top Export Destinations, By Destination Country, 2001-2008 (US$mn) ............. 46
Company Monitor .. 48
Abdulla Ahmed Nass Group ...... 48
Ahmed Mansoor Al-A'ali (AMA) ............... 50
Seef Properties BSC . 52
Tas'heelat Real Estate .............. 53
BMI Methodology .. 54
How We Generate Our Industry Forecasts 54
Construction Industry ............... 55
Bank Lending ........... 56
Real Estate/Construction Business Environment Rating .............. 56
Table: Weighting Of Indicators 57
Project Finance Ratings Indicators ........... 59
Table: Design And Construction Phase ..... 59
Table: Commissioning And Operating Phase ' Commercial Construction ... 60
Table: Commissioning And Operating Phase ' Energy And Utilities ............ 61
Table: Commissioning And Operating Phase ' Transport ........... 62
Sources ... 63
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