Bahrain eyes non-hydrocarbon sector for growth: CBRE

Manama : Bahrain looks towards the non-hydrocarbon sector to drive growth, as economic uncertainty on an international and regional level continues, with decreased oil prices and concerns over surplus supply, according to the global property consulting firm CBRE as part of its Q1 2016 Bahrain MarketView.

Bahrain’s non-oil sector, which has remained relatively stable despite the wider economic challenges, is driving sustained economic growth, which is projected to remain at 2.9 per cent in 2016, according to Bahrain’s Economic Development Board figures. 

Following the slow-down that resulted from the wake of the economic crises, development activity is cautiously increasing with investor interest predominantly in local and GCC markets.

Q1 2016 has witnessed the launch of notable new freehold apartment developments at Dilmunia, Diyar Al Muharraq and Durrat Al Bahrain.  At Durrat Marina – Layan, a Bin Faqeeh Group project is breaking ground on a unique residential project with a private water park.  

The residential rental market saw little change in the past quarter, as rates remained stable, overall, with Juffair, Amwaj Islands and Seef District the most popular amongst western expatriates seeking accommodation for lease.  

Reef Island maintains its popularity amongst young professional expatriates, sustaining 90pc occupancy across the apartment towers, with this location and Seef District benefitting from their close proximity to offices, destination shopping malls and entertainment centres.   

Retail Market

In Q1, Bahrain witnessed several significant shopping development openings and new project announcements, with the provision of neighbourhood shopping centres and food & beverage solutions having merged as a major trend.  Community retail developments are becoming more comprehensive, providing family entertainment, such as large scale children’s play centres and cinema screens – a prime example being Seef Mall Muharraq.  

Galleria in Zinj, a Dadabai project offering over 42,000 square metres of GLA and anchored by the popular LuLu Hypermarket, has opened along with the $40 million Bahrain Defense Force initiative, Wadi Al Sail in Riffa. Al Mercado in ‘new’ Janabiya, with a leasable area of 5,000 square metres and anchored by Al Osra supermarket, is also on track to open in September 2016. 

In the destination mall arena, soon to be added to the options for shoppers in the capital is the upcoming The Avenues on the Manama Corniche at Bahrain Bay, which is expected to open in early 2017.

The development will reportedly provide 38,000 square metres of total leasable retail space and an impressive range of facilities, including outdoor children’s play areas and arcades, a running track and gym sets, waterfront dining, a traditional style souk, an indoor market, cinema screens and a public park.  

Heather Longden, Associate Director, CBRE Bahrain commented “The Avenues demonstrates that as the Bahrain market grows in sophistication, competing retail developments are diversifying and providing a greater level of leisure and entertainment facilities to meet customer demands”.

Office Market

Demand for office space in Bahrain is currently moderate, while space requirements for government sectors and financial centres have decreased.  Reluctance by some landlords to reduce rental rates and provide more flexible lease terms has also led to poor occupancy levels in many properties, although attitudes are changing.

The combined Grade A and Grade B and subprime office stock is currently estimated to measure circa 1.45 million square metres and as of the first quarter of 2016, quoting rents for high quality space are averaging BD7 per square metre per month, although prospective tenants are in a strong negotiating position to obtain lower rates in the current market.  

Leading Grade A landmark properties, including Bahrain Financial Harbour and World Trade Centre are offering attractive packages for occupiers with large space requirements, seeking a cost effective solution and best in class facilities.

Developers and landlords of commercial office towers who are able to diversify their offering and provide services, as well as workspace solutions that strive to meet the needs of the modern business, are likely to continue to be more successful in terms of attracting new tenants and maintaining existing ones.

James Lynn, Director,said “Landlords are increasingly open to providing solutions and greater flexibility to reach and maintain occupancy targets, with flexible terms, shorter leases, extended rent free periods and fitted office spaces.”

Hospitality Market

The hospitality sector continues to see growth particularly in the 5-star and luxury segment, with the likes of Rotana Downtown now completed and Wyndham Grand at Bahrain Bay set to open in H2 2016.  

A boost for the Diyar Al Muharraq Development has been the launch of Al Marassi, with Emaar Hospitality Group reportedly set to build five new hotels within the project, which is scheduled for completion in 2018.  

While there has been less focus on the mid-market and budget categories, Ibis in Sanabis, a popular mid-market brand, opened to strong demand from business travellers in 2015.  

This was followed by the 140-room Ramada City Centre, which opened in Q1, opposite City Centre mall.