Rental rates in several emerging areas of Bahrain have continued to rise in 2012, with compounds enjoying occupancies up to 90 per cent, while rentals in the areas most affected by local unrest have dropped back to 2006 levels, said a report.

The compound market is undergoing a period of change as locational dynamics come to the fore and demand switches from one area to another, added the report by the CBRE Bahrain Research Team, which forms part of CBRE Global Research and Consulting
Office market.

New demand for local Class A office space remains weak in the face of growing supply, the report said.

“Much of the new supply is in the form of new office towers in Diplomatic Area and Seef District on which construction had commenced just as the Bahraini market entered a period of reducing demand driven by global market conditions and the programme of social unrest in the Kingdom,” said CBRE senior director Mike Williams.

The new office space in Diplomatic Area in particular is likely to be most problematic given that the area is deeply unpopular with tenants who are unable to access the area, circulate or park.

Seef District may yet follow this path as built density to date is somewhat at variance from plans originally drawn up for the area.  However, the market slowdown has saved this district in the short to medium term and development in Seef has now slowed to a trickle, the report said.

Existing office buildings are functioning with moderate level occupancies and vacant land plots enabling most buildings to satisfy the majority of their staff and visitor parking requirements.

The Class B office space, which previously comprised a mix of older properties, those in lower-profile locations or apartments in or close to prime office areas, has experienced mixed fortunes based on a range of factors.

“Older, poorly maintained properties are moving into Class C category rental rates, office buildings in less prominent locations are still broadly popular as they continue to serve their local market, while apartments used as office space are largely returning to residential use,” Williams noted.

“They were always poor options in terms of space efficiency and parking ratios, and the sheer volume of available local Class A space that has either been fitted or part-fitted means that former apartment users are now able to move into much more efficient and practical spaces for roughly the same as they were paying previously.”

Retail sector

The retail mall sector in Bahrain has become somewhat polarised with huge variations in performance between those that are doing well and those that are not.

At one end of the spectrum, City Centre and Seef Mall have high occupancy and strong rental rates, with Moda Mall following closely behind.  Moda Mall is always difficult to ‘read’ in terms of performance as it relies on a combination of low footfall/high spend which means that it always appears to be somewhat underpopulated by shoppers and the ‘bag count’ is low.  Moda Mall has also recently announced a $13 million refurbishment programme.

Residential sector

The Government announced a stimulus package comprising $300 million spending on infrastructure projects and a $550 million scheme to provide housing for the roughly 50,000 families on the Government housing waiting list.

Although there has been much press speculation regarding the needs of the low-income sector, there has been very little movement from the private sector in addressing this issue, the report said.

The problems of high land prices, the lack of infrastructure in remote areas and high building costs mean that it remains difficult to meet the price-sensitivity of the market.

Low-income social housing for owner-occupation is essentially a problem to be addressed by the Government while the most successful private sector housing model at present remains low to middle-income apartment housing for rent, Williams said.

Relatively small apartment buildings of ground plus four to six floors are emerging in various districts of Bahrain and are being let quickly, sometimes off-plan.

The tenants are a mix of corporate entities who require worker accommodation or low to middle-income Bahraini couples usually starting their first home.

Finishes are basic and rents for two bedroom properties can start as low as BD150 ($398) to BD180 per month, largely depending on location.  These are effectively only a temporary solution to the pressing housing needs of this sector of Bahrain society, but a solution nevertheless.

Several middle-income housing projects have been launched in Bahrain in the last three months and sales have reportedly been brisk to date.

In the current socio-political climate, sales to expatriates have naturally dwindled to virtually nothing as employment risks and the long term future of Bahrain remain somewhat uncertain, the report said. – TradeArabia News Service