Bahrain firms in talks to move operations to Dubai, analyst says

The article we publish today expresses in the best way the following concept: in the middle of this civil unrest in the Gulf state, Dubai is and will always be the safest and surest place to invest in.

Peruse the article and judge yourself!

Some companies in Bahrain have expressed interest in moving their operations to Dubai as the civil unrest in the Gulf state continues indefinitely and begins to impact the island state’s business community, a Dubai-based real estate analyst has claimed.

“Office corporates, companies in Bahrain, [are] looking towards Dubai,” Elaine Jones, CEO of real estate consultancy firm Asteco said at a conference in Dubai.

However, Jones conceded that while any potential moves from Bahrain to Dubai were simply speculation at present, interest has been expressed. “They are not moving yet, it is much too quick, but people are talking and asking questions,” she added.

This week, a Bahrain government official said no big financial institution is planning to leave the country as a result of the political unrest, seeking to soothe any concerns that the ongoing political crisis would hurt Bahrain’s status as a financial hub.

Bahrain saw the worst sectarian unrest between its majority Shi’ite population and its Sunni rulers since the 1990s, resulting in the death of at least 13 protesters and four police before Bahrain declared martial law last month and invited troops from Sunni Gulf neighbours to help quell the unrest.

The clashes as well as the heavy-handed security crackdown that followed have resulted in the Formula One Grand Prix opening being cancelled, conferences moved and bankers doing deals elsewhere, raising fears that financial institutions could move their offices to the more stable Dubai.

“We confirmed with them that the vast majority of banks are staying, they’re all committed to Bahrain, they recognise the business in Bahrain,” Boyd Winton, director for financial services at Bahrain’s Economic Development Board (EDB) told a news conference.

The EDB sets Bahrain’s economic policies and is tasked with attracting international business to Bahrain to diversify the economy away from oil. The financial industry accounts for about 25 percent of Bahrain’s GDP.

Winton said only four financial services institutions had told the government they planned to leave. This included two firms who maintained only a representative office with one staff and an asset management company that he said had long planned to leave by the end of the year.

But bankers say lenders will avoid officially closing down their offices and instead will quietly move some staff to Dubai to prevent their relationships with the Bahraini government from being damaged.

Bahrain as a financial hub had been severely hit before the unrest. Its investment firms posted steep losses since a regional property bubble burst in 2008 ended their business model of arranging financing for real estate projects. They have failed to develop new business since.

Bankers say Bahrain is struggling to attract new financial businesses to the island kingdom to compensate for the jobs slashed at these companies over the past two years, and that newcomers to the Gulf Arab region are likely to choose Dubai as their regional office due to the unrest.

Banks in Bahrain are now also expected to be hit by higher volumes of loan defaults as the unrest has severely hurt the cash-flows of their corporate loan customers in Bahrain.

Dubai is the world’s most popular retail city

CBRE survey puts emirate at the top with London; Major influx of US and Asian retailers over last 18 months

Nearly 1.2 million square metres of retail space has come on to the market since 2006 in Dubai (FILE)

Dubai now equals London as the most popular retail city in the world, attracting more than half (56 per cent) of all international retail brands, according to annual survey released by leading global real estate adviser CB Richard Ellis (CBRE) on Monday.

With 1.2 million square metres of retail space having come on to the market since 2006, a wealthy consumer base, and very little competition from local retailers, Dubai’s stature as a key destination for international retailers has grown quickly. A further trend has been an influx of US-based retailers in the last 18 months. Traditionally US retailers have been reluctant to adopt the retail franchise model that is commonly used in the Middle East; however, with limited opportunities for growth in their own markets, more retailers have taken the plunge and made inroads into the region, typically using Dubai as a springboard into the region’s other markets, CBRE said.

Dubai and London are followed in the top retail city rankings by the established markets of New York (44.3 per cent of international retailers), Paris (43.6 per cent), and Hong Kong (40.6 per cent), which clearly still hold considerable global pulling power. The composition of the rest of the top 20 comprises a mix of traditional and emerging markets, providing an indication of how global the international retail business really is.

Michael Leighton, Senior Retail Consultant, CB Richard Ellis Middle East, said: “Historically, Dubai has been the entry city to the Middle East, but now retailers are looking to replicate their success in other Middle Eastern countries with a similar consumer base. Essentially this means a wealthy, well educated, and well-travelled population with a high propensity to use modern shopping malls. Kuwait and Saudi Arabia fit the bill, as does Abu Dhabi where two new shopping centre openings is likely to make it a bigger destination for new entrants than Dubai next year. The recent unrest in the Middle East cannot be ignored, but it is unlikely that this will have any long-term impact on retailers’ desires to expand into the region.”

Dubai is also the top target for Asian retailers targeting markets outside their home region (22.9 per cent) and is second only to London as the top target for American retailers, with 62.7 per cent of those businesses surveyed present. Notably, these are the only two cities (outside of Asia) where more than 10 per cent of Asian retailers have a presence, which reflects the fact that most Asian retailers have yet to leave their own region.

Meanwhile, CBRE) said on Monday that the UAE houses second highest number of fashion and luxury brands in the world after United Kingdom.

According to the 2011 edition of its How Global is the Business of Retail, the UAE placed second to the UK as the most highly penetrated global market, attracting 54 per cent of all international retail brands surveyed. The UK maintained its position as the world’s most international retail market for the fourth year running with 58 per cent, while the US made up the final position in the top three with 50 per cent. Other Middle East countries fared well in the study were Saudi Arabia (11th), Kuwait (14th), Bahrain (29th), and Qatar (30th).

International expansion remains a key strategy for retailers throughout the world, with 40 per cent of new openings occurring outside the retailer’s home region. Even though the pace of expansion has slowed, with the overall footprint increasing by 2 per cent compared with 4 per cent in 2009 and 12 per cent in 2008, some 21 countries saw five or more new retailer entrants last year.

Peter Gold, Head of EMEA Cross Border Retail, CB Richard Ellis, said: “Although the pace of growth slowed in 2010, retailers continue to grow their store networks in a wide range of international markets, targeting both mature and emerging countries. While it is clear that the globalisation process is ongoing, two factors will limit the rate at which retailers expand in coming years. Firstly, a limited pipeline of new space in many markets will restrict access to prime retail locations, and as a result, more retailers may look to grow their business via online platforms rather than expanding their physical store network.”

The Middle East continues to be a major target for international retailers. Following the large number of new entrants in 2009, the UAE fell back slightly in 2010 in terms of new store openings; however, this is relative to the high proportion of retailers already present in Dubai and retailers remain active in the region, with Kuwait (six new entrants) and Saudi Arabia (five) proving popular.

Peter Gold said, “Retailers are increasingly looking at markets where GDP has held up relatively well and where consumer spending is unlikely to be squeezed by austerity measures that have mostly affected Western European and North American consumers. Retailers from more mature markets are looking to emerging markets for new growth, as the scope to expand and generate strong returns in their domestic markets diminishes.”

CBRE’s annual survey – now in its fourth year – mapped the global footprint of 323 of the world’s top retailers across 73 countries to identify trends in global retail expansion at national and local level. The report found that Middle East markets are attracting an increasing number of international retailers and are competing with established global retail centres, with Dubai climbing CBRE’s rankings to share the top position with London as the most targeted retail destination. Kuwait City and Riyadh also maintained key positions in the top 20 ahead of many established destinations.