Bahrain real estate market extends gains as Economic Vision 2030 catalyses growth

RESIDENTIAL MARKET

Faisal Durrani, Partner – Head of Middle East Research, explained: “The tentacles of Economic Vision 2030 are spreading throughout the economy and business confidence is rising. This, coupled with sustained high oil prices and the government’s forward-thinking initiatives, such as the $30 billion set aside for real estate projects that encompass all sectors is starting to pay off as evidenced by rising prices and deal activity. In the residential market for instance, there has been a 3.2 per cent increase in the number of transactions when compared to the same period last year”.

Knight Frank highlights that the increases in deal activity comes despite the 4.3% rise in average apartment prices, which now stand at about BD 810 per square metre. Villa prices are also up about 4.5% on last year. Villa lease rates have increased by an average of close to 8%, so there has been some yield compression.

Durrani continued, “With over 45,000 new homes planned around the country, yields may start to move out once more, should demand not be able to keep pace with the upcoming supply. The current challenge to the residential market’s upward trajectory will of course be rising base rates and the impact on mortgaged buyers.”

COMMERCIAL MARKET

Knight Frank’s analysis of Bahrain’s office market reveals that rents are slowly starting to rise as economic confidence beds in. Indeed, with economic growth forecast to accelerate to 4.4% during 2022, business confidence is rising.

Stephen Flanagan, Partner – Head of Valuation & Advisory, MENA said: “Anecdotal evidence suggests that organisations that implemented hybrid working arrangements are now returning to full occupancy, driving up demand. Bahrain’s business environment continues to improve, with new labour laws designed to protect workers as well as employers’ rights aiding business confidence.

“While lease rates remain relatively low, especially when compared to other Middle East hub cities, they have edged up by 1.6% this quarter and now average about BD 63 psm, with Bahrain Financial Harbour retaining its position as the most expensive location to rent an office in Manama at BD 72 per square metre”.

Elsewhere, Knight Frank reports that warehouse rents are on the rise, growing by 2.2% in the most recent quarter and currently average BD 35 per square metre.

Flanagan continued: “Like elsewhere in the world, higher quality warehouses are in most demand and command a rental premium. Indeed, Edamah has just broken ground on its 87,382 square meter Sitra Logistics Park to tap into this burgeoning demand for highquality warehouses”.

Durrani added: “The manufacturing and logistics sectors are contributing to the rapid rise in requirements. In fact, the first ninemonths of the year has seen these sectors attract $290 million in investment, which will see 1,200 new jobs created through 25 different companies; decision to establish a presence in the Kingdom”.

Finally, Bahrain’s retail market has experienced increased activity in the first half of 2022, with both lease rates and occupancy levels rising, according to Knight Frank.

Monthly retail rents in Bahrain average between BD 140 to 220 psm, with super regional malls commanding rents in excess of this. New retail supply in Bahrain is likely to continue to trickle onto the market. In fact, Avenues Mall Phase 1 contributed around 40,000 sqm to the overall supply.

For more information, please contact Faisal Durrani.