Rents fall in Bahrain on oversupply
Manama, September 22, 2010
Rents in Bahrain in the retail, office, residential and industrial sector have fallen as developers increasingly realise they have failed to focus on end-users' demands, a top market analyst said.
Oversupply had been mounting as a result, with more real estate available than there being end-users, Global real estate adviser DTZ Middle East consulting head Martin Cooper said.
Speaking on the sidelines of the Cityscape Connect Business Breakfast at the Bahrain Financial Harbour's Capital Club, Cooper said research had now shown there was a need more than ever for affordable housing, hotels for special segments and office spaces for small businesses.
'The region has woken up to the fact to only give the people what they can afford and not recklessly invest in projects they cannot afford or those which are of no use,' he said.
The event, organised by Cityscape, Dubai's international real estate investment and development event, was attended by industry leaders from real estate investment, development, advisory, legal and finance backgrounds who shared their insights.
It provided a market overview and economic outlook for Bahrain and the Middle East real estate with a particular focus on establishing a viable model for affordable housing; assessing supply and demand dynamics for commercial and retail assets in the current climate; projecting residential values and evaluating the housing pipeline; opportunities in transport and infrastructure as well as identifying under-served asset classes for investment and development.
'Bahrain's economy appears to be weathering the global financial crisis relatively well,' he said.
'Economic indicators are expected to improve through the remainder of this year, signalling a modest revival, even though there are increasing signs that the wider global economic recovery is slowing,' he added.
Bahrain's main retail destination, Seef District, has reached saturation point but there was potential for neighbourhood retail, food and drink in established communities in Bahrain, he said.
'In the office sector, we expect to see further downward pressure on office rents during the remainder of this year as large volumes of supply continue to increase total stock and levels of occupier demand remain low,' he added.
The freehold residential market also continues to be characterised by very low transaction volumes and demand has shifted from speculative investors to end-users, Cooper said.
'This is likely to continue as lack of finance, investor apathy and oversupply continue to have a negative effect on the market.
'There is also evidence of weakness in the leasehold market with rents in the apartment sector experiencing declines of up to 25 per cent, while villa rents have also shown signs of easing,' he added.
He said the industrial sector has experienced a fall in demand which can be attributed to a general decline in trade due to the recent economic downturn.
'Over the past 18 months, rents have fallen by as much as 30 per cent for good quality stock and, for the remainder of 2010, we predict rents will stabilise at $6.6 to $7.95 per sq m per month for well specified and located stock,' he said.
'Bahrain's luxury hotel market also softened in 2009 and this year as a result of the global financial crisis.
'This followed a sustained period of high occupancy and average daily rates from 2004 to 2008.'
He said whilst there is a potential risk of oversupply of five-star hotels in the medium-term, opportunities exist in Bahrain in the four-star and boutique hotel market segments.
Speakers at the event included Eskan Properties Company chief development officer Fadi Jamali, First Bahrain general manager Amin Al Arrayed, Sakana Holistic Housing Solutions chief executive officer R Lakshmanan and Trowers and Hamlins partner and real estate head Abdul-Haq Mohammed.
Cityscape Connect is an initiative from Cityscape which aims to give back to the industry a series of time and cost-effective functions designed to stimulate networking and discussion of the key issues affecting the real estate industry.
The events act as a platform to network, share information and understand the changing market dynamics to increase levels of transparency and lessen the burden of the crisis. – TradeArabia News Service