With a new CEO at the helm, Bahrain Financial Harbour aims for a fresh start – but is its revival a bridge too far?
When the $3bn Bahrain Financial Harbour project was launched in 2002, Bahrain, and indeed the wider Gulf, was a very different place than today
The country and its neighbours were at the beginning of a construction boom that would see their cities develop as rapidly in a few short years as other places had in decades.
Over ten years later and what was supposed to be Bahrain’s most iconic project is a byword for construction delays, mismanagement, and both architectural and developmental navel-gazing. Other than the shimmering Harbour Towers and adjacent Harbour Mall, much of the project remains unfinished and swathes of what has been completed lies empty.
But at the end of 2014, the developers appointed a new CEO, Ahmed Ebrahim Al Moataz, and made a number of announcements about a restart of projects that had been stalled. This included the construction of the commercial west car park and an as-yet-undisclosed residential project from the developers of the Harbour Mall.
In an exclusive interview, Al Moataz told Construction Week that BFH was optimistic that these new launches would persuade some of the other developers who purchased plots at the site years ago to break ground, particularly as they seek to address issues of access and parking, a major complaint from potential and actual tenants thus far.
But despite the announcements, the future progress of Bahrain Financial Harbour was very much contingent on the wider economic environment, Al Moataz said. Although the real estate market was improving slowly, it is telling that the recently-announced work relates to facilities and residential – and not commercial or retail.
Indeed, Al Moataz appeared to suggest that adding more commercial or retail space to the project – as envisaged in the original masterplan – may not be wise at present.
“With regards to the completion of the overall development, progress is evidently made but it is contingent upon the recovery of the real estate market. As we all know, today there is a surplus of already available units on the market and it wouldn’t be prudent to contribute to this pool with even more units,” he said.
“However, as there are clear signs of a recovery on the horizon, we expect more developers who had purchased plots at BFH will start to actually shift into implementation mode of their plans, which had been on hold for quite a while.”
Not that there is any intention on the part of the developer to reduce the size of the development, Al Moataz said, and the original concept behind the project to create “a city within a city” – comprising 10 projects and 380,000m2 of commercial, retail and residential property – has not changed. Despite the economic and political changes in Bahrain over the past decade, the anticipated footprint remains the same.
“The size of BFH project remains the same with no changes or additional projects,” Al Moataz said.
One interesting change to occur since 2007, he confirmed, is that plans to introduce individual chillers for each part of the project – allowing more sustainable management of the cooling system – has been scrapped, replaced with a more traditional central district cooling system for the entire scheme.
Equally, road links between the BFH project and the nearby King Faisal Highway have been scaled down, with a series of underpasses and flyovers replaced with a simpler exit to the main road. It remains to be seen what affect this will have on congestion if the project is ever either finished or fully tenanted.
Of all the GCC states, Bahrain has been put through the wringer the most in the years since the financial crisis, facing not only severe economic challenges but also political instability that continued into 2015.
The Bahrain Financial Harbour found itself at the centre of the 2011 protests that hit Bahrain during the Arab Spring, in that demonstrators were camped outside the district at Pearl Roundabout for weeks.
While those protests have since calmed somewhat over the past couple of years, the economic situation in Bahrain remains acute, especially in the real estate sector and particularly in commercial and retail – the very markets that the Bahrain Financial Harbour project provides.
CBRE estimates that 25% of all commercial office space in Bahrain is currently empty – much of this in either the BFH or in rival project the Bahrain World Trade Centre.
Compounding this issue, the consultancy said in a report published in November 2014, was the fact that both projects were charging far higher rents than the market was willing to pay.
As a result, much of the office space in BFH was taken up by government departments as the private sector opted for smaller, cheaper developments. Getting private tenants will be integral to future growth.
“Bahrain Financial Harbour and the World Trade Centre… have yet to alter pricing strategies in response to the changing dynamics brought by a continued shift in demand from both international and local occupiers,” said Steve Mayes, Middle East research director at CBRE Bahrain.
But others are more bullish, pointing out that oversupply in commercial office space in Bahrain is no new phenomenon and that Bahrain Financial Harbour is the most likely to pick up new clients due to its prime location and decent access and parking. The announcement that the western car park will be completed this year only adds to this.
“Occupancy rates for Grade A and B stock… are at circa 50%, which is low by regional and international standards… (but) BFH has performed pretty well given the quantum of space within the development,” said Stefan Burch, partner and general manager for Saudi Arabia and Bahrain at Knight Frank.
“To put it in perspective, BFH has leased the equivalent of six to eight standard office towers.
“Our view is that BFH will continue to perform well and should increase occupancy in the short term – though it is unlikely that this will rise to over 80%, due to the size of the development.”
Bahrain Financial Harbour’s Al Moataz said that the project had currently leased 60,000m2 of office and retail space across the whole project, a figure that he described as “big” and “satisfactory”, and argued that the rates charged in the project matches the facilities, location and amenities that BFH provides.
While the appointment of a new CEO and elements of the scheme restarting is undoubtedly a positive step forward for the project, critics would rightly point out that a new car park and an as-yet-unannounced residential development only scratches the surface of what remains to be done at Bahrain Financial Harbour.
But Al Moataz is nonetheless optimistic, claiming that even during the political turmoil and economic instability that has wracked the island nation, BFH has managed to either retain tenants or replace those that have left.
Even if the recent announcements may be baby steps, they are at least steps in the right direction.
“Despite the persistent economic slowdown, BFH is doing quite well, with virtually no losses of existing tenants and some, who moved out for whatever reasons, have already been replaced by others. Furthermore, there is strong interest from various diverse entities about leasing space at BFH,” said Al Moataz.
“There are clear signs of recovery and we are optimistic that in 2015 the market will witness a new boost,” he added.