First Bahrain near to study end for Riyadh project

Amin Al-Arrayed said the needs of clients in Saudi may be different to Bahrain.

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First Bahrain is in the final stages of its study of Saudi industry that will inform the launch of its Majaal warehousing concept in the kingdom, despite mixed results from its flagship project in its home market.

The developer, which is Kuwait-based despite a focus on the Bahrain market, has progressed from the Memorandum of Understanding it signed with a Saudi partner to launch a project in Riyadh to a comprehensive study of the market and potential demand, according to its CEO.

“We’ve been looking at the specifics of what you need to build - this is a lot more of a detailed study than when we signed the MoU, which was more of a macro-level look at the country,” Amin Al-Arrayed told CW from Manama. “We’ve brought Ernst & Young on board for this comprehensive study, looking at areas such as where to build and what size.

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“We are now aiming for the first quarter of next year to be able to finalise this.”

The original Majaal warehousing project is based in Bahrain Investment Wharf. Its initial design planned three sets of warehouses in phases that would provide high-quality, secure warehousing space for a range of industry tenants. The spaces to rent, ranging from 250 square metres to 1,000 square metres, would allow office space with internet connection, secure storage, light manufacture and easy access to the port and the capital city.

Al-Arrayed explained that the study investigated the differences between the needs of potential Saudi clients and those local and foreign small and medium enterprise (SME) clients in Bahrain.

“One key issue is, ‘how small do you want to go?’” he said, in relation to the units of space that would be leasable. “In Saudi, the ‘S’ in ‘SME’ is larger than in Bahrain. So part of what we’ve found is that spaces for 250m² would not be necessarily appropriate for a lot of Saudi tenants.

"The other issue is with height: in Bahrain there are heights of eight metres and 12 metres, though we will likely need to build for docking bays of 40-foot containers.”

He added that the land prices in Riyadh are roughly similar to that of Bahrain, but the margin from rental is narrower. This is further encouragement to build for bigger clients, who will lease larger areas and so generate more profit from the economies of scale.

“It’s more of a commoditised business in Saudi,” he said.

It has been a dramatic year for the Bahrain project. The company was able to lease out every space of its first phase of warehouses – those that contain the smallest units – with a waiting list for further interested parties.

However, the company said it has stopped the intended development of the second phase, which would develop warehouses with bigger units, due to the fall in demand from international tenants following the civil protest in the country in February and March.

The third phase – a single warehouse for one big client – has also been adapted to meet the demand for small companies by breaking the warehouse into units “identical” to the first phase.

“The general feeling from outside had been that they did not want to invest at the moment in Bahrain, and so the decision on the second phase is part of the shifting appetite and the new design,” he said.

He added that the decision for both the Bahrain project’s redesign and the upcoming Saudi project will be made in the first quarter of 2012 with tenders to follow.