Bahrain’s industrial realty digs in deep

Following the period of unprecedented tensions across Bahrain, we are finally returning to a period of stability, which has positive ramifications for the kingdom’s real estate landscape. While the residential and office markets may be slow to pick up, the government has continued to nurture Bahrain’s industrial sector, even through the period of heightened national tensions.

The constant support for the sector has resulted in an industrial market that appears to now be self-sustaining and quickly garnering the interest of international occupiers. In the long run, this rapidly growing sector is expected to play a crucial role in Bahrain’s economic rejuvenation.

Bahrain’s position at the centre of the Arabian Gulf gives distributors easy access to any GCC port. Furthermore, efficient transport links by land and air also enables swift access to the broader region. Of particular attraction to logistics companies is Bahrain’s proximity to Saudi Arabia, the Middle East’s largest economy. The island nation is connected to Saudi Arabia’s Eastern Province by the 25-kilometre long King Fahad Causeway.

The Causeway averages around 50,000 vehicles daily and the total number of crossings in 2013 reached more than 19 million, a 12 per cent increase on the previous year. There have also been reports that there are plans under consideration to accommodate the heavy traffic to allow it to handle up to 250,000 vehicles per day.

Wide-ranging incentives

This, coupled with the wide ranging incentives offered in Bahrain from 100 per cent freehold ownership to tax-breaks is catalysing further expansion.

Cluttons have recorded significant interest in industrial locations such as Bahrain Investment Gateway and Bahrain International Investment Park (BIIP) as foreign companies look to the market as their supply chain platform to handle goods and/or services bound for Saudi Arabia and the rest of the Middle East.

The success of Majaal Warehousing at Bahrain Investment Warf (BIW) is indicative of the positivity in the sector. After successfully renting out the first phase in 2011, works were completed on its 12,000 square metre second phase over the summer of last year. We were involved in letting out the entire second phase to a single client shortly before handover.

Phase three has also been fully let to two companies prior to completion. An increasing number of existing companies are looking to relocate to these emerging industrial areas and developments. This is a result of not only the dated industrial stock available, but also due to the minor disruptions in locations like Sitra.

Many businesses occupying these older premises are conscious of the newly completed space and are keen to relocate to newer, more accessible locations that benefit from access to the new infrastructure facilities available. This migration has resulted in a supply drought of quality space, which has placed upward pressure on monthly rental values.

These have risen to between 2.50 Bahraini dinar per square metre and BD4 during Q1-2014, from 2.00 dinar to 3.50 dinar in the first quarter of last year. The ongoing investments will no doubt continue to bolster Bahrain’s position as one of the region’s leading industrial centres.

As international logistics operators and distributors hone in on the kingdom, further rapid depletion of supply is inevitable, which will no doubt result in further rent escalation.

— The writer is Cluttons’ head of Middle East operations.