Office and residential rental rates remain stable with renewed interest in commercial sales transactions
Bahrain’s economic growth showed positive signs in the first quarter as oil outputs were revived; employment in the kingdom also rose significantly over the last year, largely on the back of a programme of real estate/infrastructure projects taking place throughout the Kingdom, according to the latest MarketView by CBRE, the leading international real estate consultancy.
As part of the surge in housing and infrastructure projects initiated by the Government during Q2 2013, the Housing Minister announced that around $8 billion will be spent on housing projects by 2017. The government has built over 100,000 housing units over the past 50 years but with rapid population growth and constraints on the amount of available serviced land, the waiting list now stands at well over 50,000 units.
According to Mike Williams, Head of Research & Consultancy, CBRE Middle East, “The residential market witnessed an increased level of activity with a number of new developments being announced in Q2. Durrat Marina, located just north of Durrat Al Bahrain, signed a memorandum of understanding for the sale and marketing of the first phase of development which includes a residential area, comprising villas and apartments, a ‘festival’ retail area and marina.”
“The second phase of Wahat Al Muharraq, a 227-villa housing project was also announced in Q2 2013, the first offering of 32 units at the Seavilla project on the reclaimed Dilmunia Island was released and successfully sold. A new 128 villa project at Durrat Al Areen, the BD20 million Oryx Hills housing project which is part of the Al Areen master planned community was restarted, and the foundation stone for a 4,500 unit government housing unit scheme was laid.” he added.
There remains little activity in the prime office market, which is now spread across the northern part of the Kingdom, in Seef District, Diplomatic Area, and Bahrain Financial Harbour. Rental rates remain subdued with new business mainly restricted to consolidation/rationalisation activity in previously used spaces that offer fitted-out accommodation.
Vacancy rates vary widely as do rental rates with tenants now able to dictate terms. There is only marginal downward movement for the renewal of leases held by those who have already undertaken expensive fit-out programmes but new tenancies are being (relatively) hard fought over although most landlords appear now to have reached their bottom price and suite of incentives.
In the investment sector, the realisation that the market has ‘bottomed out’ seems finally to have stimulated the thoughts of those investors who have been waiting for several years for a ‘bargain’. The reality that rents and therefore values/prices are more likely to rise over the next few years rather than fall further, has prompted renewed enquiries for the better, prime commercial properties.
Properties with existing, quality tenants on long leases, with good management and in prime locations are now being actively considered with several deals on the verge of completion after a long period of dormancy in the investment market.
Finally, the hospitality sector saw the announcement of a raft of new hotel projects in Q2 2013. Kuwait Finance House announced that it would be financing the completion of the stalled Banader Rotana Hotel project, a 28 storey, five-star hotel and furnished apartments property offering 251 rooms, while Hilton Worldwide announced its intention to open a 350 room, five-star Double Tree Suites in Juffair in late 2015. Nama International, Swiss-Belhotel International and Domain Hotels also announced development of hotel properties in Bahrain.