Every sector, and indeed every company in Bahrain, is adapting its business model to walk in the path of the country’s Economic Vision 2030 (which focuses on shaping the vision of the government, society and the economy, based around three guiding principles; sustainability, fairness and competitiveness). With this in mind, how is the real estate sector – particularly the Bahrain Bay project – walking this path?
The real estate market, and overall industry, plays a crucial role in the economy of Bahrain. It is not only a result of the recent years but it is the product of decades-long work where Bahrain was ahead, among other states, in bringing the most beautiful architecture and the best designs, as seen in our palaces and some governmental buildings. You can see the old dynamism around Bahrain, in Muharraq for example.
That gives us a sense of pride, and in fact distinguishes Bahrain in terms of real estate. Also, our strategic location in the Gulf, and the strong legislation in terms of finance and business, gives us an edge. The history of the pearl trade and the spice trail between east and west built our reputation internationally in the past.
Currently, we are a financial centre; a global Islamic financial service sector that is adding value to trade, finance and real estate businesses. We are extending the legacy of that background, that history and experience and we are leading these values towards the future of Bahrain in terms of real estate.
This is where we were when we hired Skidmore, Owings & Merrill from New York. We had an intensive session with them, with workshops, asking them how they could help us to extend this legacy for the future of Bahrain. We wanted to design a new project surrounded by water to bring leisure, residence, business, investment and commercial activities. All of this needed to take place on an island that is based on strong infrastructure in terms of IT, communications, services and all other amenities required. We wanted to be located in the centre of Bahrain, a project that could be the new Manama (the centre of the Islamic financing in the Middle East).
We also wanted to create a new business centre that would take Bahrain forward for the next century.
We have been successful in creating a beautiful master plan comprised of 55% residential and 45% commercial and retail, designed around two main islands connected by two bridges with the main island of Bahrain and the King Faisal highway, one of the major highways in the country. The North Manama Causeway is an added value, connecting Bahrain Bay and the project on the north shore of Manama compromised of Bahrain Bay, the financial harbour, Reef Island and Seef district.
We have spent intensive time in thinking and researching the market to understand what is required from the real estate sector, from the overall economy, what is required by Bahrain and also by the GCC countries, and that is reflected in the design that we have introduced. We have investors from Singapore, India, Kuwait, Qatar, Dubai, Bahrain and Saudi Arabia in addition to Europe, we have investors from Germany and UK, as well as from the United States and Canada. They found that this project was in terms of its design, its master plan, its competence and philosophy, the right location for their investments.
[Until now] we have sold more than 65% of the available land, and only 35% of land remains for sale. We think that any investor coming to Bahrain Bay is not only investing, he is in partnership with us. We work on a win-win situation. We work towards helping any investor to come to Bahrain, to understand the market, to make the right business model; we help them select the right plot and execute the right development that receives great demand and goes on to become successful and iconic within Bahrain Bay and in Bahrain as well.
In this context, before we speak more about the vision of Bahrain Bay, it is necessary to mention the real estate sector recovery. We know that it has been hit very hard but everything started to fall into place again in the last quarter of 2012 and all of 2013. How is the real estate sector recovery ongoing?
As you are aware, the international financial crisis, the credit crash, and the real estate crisis that impacted the whole world impacted Bahrain also. We are a part of the international market and we are a major part of the GCC and Middle East market as well. The banking sector and the International banks in the last few years from 2009 until 2011 have been hard hit and that reflected on local banks because of their relationships with the International banks. That in turn impacted the real estate model severely, mainly because the real estate market depends on three major elements; 1) the investors; 2) the project or the product; 3) the financing.
One element stopped working effectively and the model stopped working. The size of the market of Bahrain and the size of banks in Bahrain, the impact on them was a little bit higher because their size is not as much as international size. The government and the private sector worked closely together in the last few years. There were discussions on how to put together a proper strategic plan to recover the markets as soon as possible and I think we have successfully managed to work effectively.
It was a slow but steady path towards improving the market and the real estate sector in Bahrain. Starting from the end 2012 and beginning of 2013 we have clearly witnessed that the recovery is a fact. There is an increase in demand as the project corrected its financial position, the pricing model and the marketing strategy. The banking sector started refinancing, the business model started to work again. Bahrain was once again receiving international demand, especially from the Western economies as well as some Far East countries.
[Meanwhile] most of the third party developers who bought lands in Bahrain Bay and then stopped their project came back to us and are now discussing the way forward to recommencing the work and restarting their investments. We have received a lot of communications from the banking sector saying they are willing to start financing again; requests from new buyers as well to see new plots within Bahrain Bay, to investigate, and to see whether they could invest and make a real estate project development within Bahrain Bay.
As you have stated, the vision of Bahrain Bay was inspired by market needs in the country and the region, but also by core values such as sustainability, environmental care, community development and others. How do you translate those values and concepts into architecture and spaces?
A big part of our vision is the sustainability; the community fabric as well as the new financial centre’s closeness and relationship to water. Water and the sea are a big part of Bahrain’s culture and legacy – we wanted our project to reflect and build on that. With this vision we met with the architects and briefed them, stressing the importance of the environmental impact that the design will have. That is why we are using a very modern district cooling system covering the whole project from a centralized plant connected to reduce pollution and noise from the air conditioning system that is used as stand alone in different development.
We also have a treatment plant for the usage of the sewage water (the water is reused for irrigation and landscaping and reduces the waste of the water), as well work on the landscaping on the two islands - designing a large area with trees, flowers, greenery and open spaces that bring a breath of fresh air within the project.
The other part of sustainability is to the focus on revival of sea life. As this is a man-made island built on this area here, we have done an environment study in the first place showing that there will be a need to revive the bay after the completion of the project. We have brought international consultants to help us find ways to clean the bay and re-plant artificial underwater sea-plants and replenish small fish stocks in the bay. This will start in the second half of 2014. We are targeting this initiative to time with the completion of some of the development to reduce any further sea damage. We are proud that this is part of our philosophy.
Looking forward, with the near completion of the first anchor projects at the Bay, how will they serve as a magnet for investors in the coming year?
When you design market requirements to reflect on to the philosophy of the design, it is important in any real estate project to allocate 2 or 3 iconic investments within the project to attract big investments such as hotels or real estate shopping centres or cinemas. For Bahrain Bay, we thought of 3 iconic elements, one of them is the Arcapita Bank Headquarter, to attract the banking sector and investments. The second one was the Four Seasons hotel to attract the hospitality industry.
The third one is the Raffles City, which will have shopping centres and luxury service apartments and apartments for sale. These three elements are key factors in Bahrain Bay. The Arcapita offices were completed and operational in 2010. The Four-Season hotel is under construction and will open in the 3rd quarter of 2014. The third part which is the Raffles City is currently under design and engineering.