International expansion spurs commercial real estate
As multinationals expand into the Middle East and stimulate demand for commercial real estate, cost-efficient markets will see the greatest benefit With the economic recovery across the GCC projected to further strengthen over the next couple of years, more international companies are expanding into the region, indicating a possible recovery in the commercial property sector. Overall, the non-oil sector is expected to fuel growth into 2019, with regional GDP forecast to rise 3.1%, according to a report by ICAEW and Oxford Economics. Continued reforms, government spending on projects and stimulus plans aimed at supporting the private sector will contribute to economic expansion. Those numbers are in line with forecasts from the World Bank, which expects growth across the GCC to increase to 2.1% per cent in 2019, as compared to 2% last year. GDP will swell to 3.2% per cent in 2020. The World Bank cited progress in steps to attract investors and boost competitiveness, such as easing business licenses, lowering fees, liberalising foreign ownership, and supporting women and young entrepreneurs. New launches A regional pivot away from hydrocarbons appears to be paying off as new business opportunities are created across a range of sectors. As regional markets continue to evolve into dynamic global players at the helm of the fourth industrial revolution, a succession of international companies has announced new launches or expanded commercial operations across the GCC. Cloud computing infrastructure enabler Amazon Web Services will open the first of several data centres in Bahrain this year, the Fortune 500 company said recently. In April, Chinese ecommerce and fintech brand WonderNews announced an investment of $50 million in its regional headquarters, also in Bahrain. Among a wave of other players opening new offices in the GCC this year are the asset manager BlackRockInc and the real estate broker CBRE and British CRM technology company Innervate. And in a ringing endorsement of the resurgence of the GCC property sector, Warren Buffet’s real estate brokerage, Berkshire Hathaway HomeServices Gulf Properties, said it would open an office in the region this year, with a team of 30 advisors and support staff. One attraction for these companies is the as-yet largely untapped market of close to half a billion people for goods and services in tourism, retail and ecommerce, technology services and the consumer sector. Additionally, the Gulf’s unique location serves as a powerful hub connecting Asia, Africa and Europe. Market recovery Considering that activity, the region’s commercial property market could well be on the road to recovery. Commercial real estate remains in demand across the GCC, although tenants have a sharper eye on cost efficiencies as the economic recovery gathers pace. Markets such as Bahrain, where commercial rents are less than half the cost of prime locations in the UAE, according to Knight Frank, are therefore finding greater favour with investors. It is 35% cheaper overall to set up a company in Bahrain, compared with Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC). Firms are also attracted by Bahrain’s lack of free zone restrictions its favourable tax regime and its proximity to Saudi Arabia and the rest of the wider Middle East. The island offers 100% foreign ownership in businesses across most sectors and has the most favourable tax regime in the GCC. With regional economic expansion set to continue over the medium term, thanks to government spending and widescale infrastructural enhancement, business opportunities are likely to become apparent across a range of sectors. In an integrated, connected world, investment dollars will flow to the most efficient players, whether in real estate or any other sector.
Tags : INTERNATIONAL