Bahrain's construction industry, although struggling somewhat, is performing better than most in the region, according to a new study.

However, the pace of development has slowed down across the kingdom, said the study by CB Richard Ellis Group.

The Kingdom's construction sector was strong but had not “overheated” by the time economic conditions worsened in the region and as a result it was not faced with such a sharp adjustment when compared to other major centres, it said.

According to CB Richard Ellis, the construction activity is still happening even as the country emerges from the difficult economic period.

'The construction industry is very non-transparent and there are problems with developers struggling with cash-flow, which is then passed on to contractors. As a result, both developers and contractors are under intense pressure. However till date, few projects have been terminated over this issue,' it noted.

There is no doubt that the Bahrain commercial investment market offers significant opportunities, especially given its location between two powerhouse economies in the Middle East - Saudi Arabia and Qatar, both of which will soon be connected to directly by causeways, the CB Richard Ellis report stated.

However, Bahrain's office market is undergoing a period of transition at the moment largely driven by geographic factors rather than market conditions, the study pointed out.

'Office occupiers are seeking to relocate from the Kingdom’s Central Business District due to access and parking constraints to areas where these two criteria are met.'

'As a result there is office demand pressure being exerted in areas that were not previously considered to be office districts and rental rates in Class B (or even apartment) buildings are now higher than in purpose built office buildings in the CBD,' he added.

The report said the prime commercial district presently appeared to be Seef District where access from all parts of the Kingdom was relatively good but inevitably, 'the price of land in Seef was high.'

'As an investment scenario this is problematic, and the market needs to settle into new locational dynamics. The traffic and access crisis needs to be resolved in the CBD (Diplomatic Area) while purpose built office accommodation needs to be completed in the emerging office districts,' the report stated.

When these criteria are met, it will be easier to “read” the market and to accurately gauge the investment opportunities, the CB Richard Ellis said.

As the Kingdom repositions its geographic focus, there are tremendous development opportunities in areas that are meeting the key development criteria.

 In addition, the access to Saudi and the development of Bahrain-Qatar causeway will create tremendous linkage between the two wealthiest nations in the GCC with Bahrain sandwiched in the middle, the report stated.

The oil and gas boom of the last few years has also driven a very sharp increase in development activity in Qatar and also in Saudi's eastern province, which is home to the Kingdom’s oil and gas industries. Khobar and Dammam too are now undergoing a very rapid physical transformation, the report said.

In such a scenario, CB Richard Ellis said, regional and multinational firms will in future set up offices in Bahrain and serve these two major markets from one central location.

'Bahrain has an added advantage since it is very much the preferred living location for expatriates amongst the three countries thanks to its modest housing costs.'

The CB Richard Ellis report concluded that if construction, architecture/engineering companies could establish a foothold in Bahrain they would be well placed to serve development opportunities both here and in neighbouring countries in the future.-TradeArabia News Service