MARKETVIEW
Bahrain, Commercial & Residential, Q1 2016
Development activity continues with
gradually increasing appetite for
investment in residential sector.
Retail Rents
Office Rents
Residential Rents
Stable Q on Q
Office Stock
Stable Q on Q
Est 6% Y on Y
Stable Q on Q
Capital Office Stock
1.45 million sqm est.
*Arrows indicate change from previous quarter.
Figure 1: Prime Average Office Rents (2008 – Q1 2016)
5%
14.0
12.0
BD/sqm/pm
-5%
8.0
6.0
-10%
4.0
Annual Change (%)
0%
10.0
-15%
2.0
0.0
-20%
2008
2009
2010
2011
2012
2013
2014
2015
Q1 2016
Source: CBRE 2016.
ECONOMIC OVERVIEW

Bahrain’s real GDP growth 2.9% for
2015, projected to remain at this level for
2016.

Non hydrocarbon sector driving growth
for the Kingdom. Construction sector top
contributor.

Development continues in retail sector in
both destination and community
segments – with greater focus on leisure
and entertainment.

Luxury hotel set expanding with
significant openings in 2016 and more in
the pipeline.

Residential apartment appetite sees
increased development activity in Juffair,
Seef and master planned projects around
the Kingdom.
Q1 2016 CBRE Research
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 figures released by Bahrain’s Economic
Development Board, real GDP growth for the Kingdom
was 2.9% for 2015 with the non-oil contribution at
3.9% and a contraction in the hydrocarbon sector at
-0.9%. Fitch's credit rating for Bahrain was reported at
time of writing at BBB- with a negative outlook.
The headline figure of 2.9% is forecasted to be
repeated for 2016, with oil sector proportion estimated
to rise to 0.5%.
© 2016 CBRE, Inc. |
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M A R K E T V I E W BAHRAIN COMMERCIAL& RESIDENTIAL
The non-oil sector, which has remained relatively
stable, despite the wider economic challenges has
been dominated by construction, private
education, health care and tourism.
However, as is shown in the construction sector
growth, development activity and project planning
continues to gain pace, particularly in the
residential, retail and hospitality sub sectors.
The Survey and Land Registration Bureau (SLRB)
reports that real estate transactions dropped by
6% to just under BD 268.2 Million in Q1 2016,
down from over BD 286.8 Million in the last
quarter of 2015.
Reductions in subsidies for utilities and vital
commodities, although not well received by
residents most adversely affected, are providing a
boost to government revenues.
OFFIC E MARKET
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.
Demand for office space in Bahrain is currently
moderate , at best. 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.
Figure 2 Capital Governorate Office Vacancy Rate and Stock (2005 – 2016)
Stock
Vacancy rate
50
1.4
40
1.2
30
20
1
Vacancy (%)
Stock (million sqm)
1.6
10
0.8
0
0.6
-10
0.4
-20
0.2
-30
0
-40
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Q1 2016
In order to reach and maintain occupancy
targets, CBRE’s market feedback suggests that
providing solutions, when it comes to offering
flexible terms, with shorter leases, extended rent
free periods and fitted office space to reduce
occupiers capital expenditure, is key, and many
landlords are coming around to this approach.
Many building owners are also moving with the
tide and providing a wider variety of space
options, ranging from 1-6 person serviced
offices, sub 150 sq.m fitted, to the larger
traditional full floors in both shell and core and
fitted condition.
Source: CBRE 2016.
The combined Grade A and Grade B and subprime
office stock is currently estimated to measure circa
1.45 million sq.m and as of the first quarter of 2016,
quoting rents for high quality space are averaging
BD7 per sq.m 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.
Q1 2016 CBRE Research
Figure 3 Manama Office Stock by Submarket
Bahrain
Financial
Harbour
9%
Sanabis
9%
Bahrain Bay
6%
Diplomatic
Area
44%
Al Seef
32%
© 2016 CBRE, Inc. |
2
M A R K E T V I E W BAHRAIN COMMERCIAL & RESIDENTIAL
Galleria in Zinj, a Dadabai project offering over
42,000 sq.m 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 sq.m and anchored by Al
Osra supermarket, is also on track to open in
September 2016. Already reportedly 80 per cent
pre let, the development is set to provide a range
food and beverage options for the local
community.
In the destination mall arena, soon to be added to
the options for shoppers in the capital is the
0.2
18
0.15
16
0.1
14
0.05
12
0
10
-0.05
8
-0.1
6
-0.15
4
-0.2
2
-0.25
Monthly Rent (BD/m²)
In Q1 2016 Bahrain has witnessed several
significant shopping development openings and
new project announcements. The provision of
neighbourhood shopping centres and food &
beverage solutions has emerged 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.
20
0
Year on Year Growth (%)
Figure 4 Rental Rates and Growth Retail Malls (2008 to Q1. 2016)
RETAIL MARKET
-0.3
2008
2009
2010
2011
2012
2013
2014
2015
Q1
2016
upcoming The Avenues on the Manama corniche
at Bahrain Bay, expected to open in early 2017.
The development will reportedly provide 38,000
sq.m 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. The Avenues demonstrates that as
the relatively small Bahrain market grows in
sophistication, competing developments are
diversifying and providing a higher level of onsite
services to meet customer demands.
HOSPITALITY SECTOR SNAPSHOT
The hospitality sector, continues to see growth particularly in the 5-star and luxury segment. Rotana Downtown has
now been completed and Wyndham Grand at Bahrain Bay is set to open in H2 2016. Amongst others, the Marriott
Residence Inn at Water Garden City is also expected in 2016.
A boost for the Diyar Al Muharraq Development has been the launch of Al Marassi. Emaar Hospitality Group will
reportedly build five new hotels within the project, scheduled for completion in 2018.
There has been less focus on the mid-market and budget categories, although Ibis in Sanabis, a popular no frills
brand, opened to strong demand from business travelers in 2015. This was followed by the 140 room Ramada City
Centre, which opened in Q1 2016, opposite City Centre mall. It has also been recently reported that Accor Group
has inked a management agreement with Action Hotels to operate an Ibis Styles economy hotel in Diplomatic Area
which is scheduled to open in Q4 this year.
Q1 2016 CBRE Research
© 2016 CBRE, Inc. |
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M A R K E T V I E W BAHRAIN COMMERCIAL & RESIDENTIAL
RESIDENTIAL MARKET
The residential rental market saw little change in
the past quarter. Rates have remained stable,
overall, with Juffair, Amwaj Islands and Seef
District most popular amongst western expatriates
seeking accommodation for lease.
Reef Island maintains its popularity amongst
young professional expatriate s, sustaining circa
90% occupancy across the apartment towers. Reef
Island and Seef District benefit from their close
proximity to offices, destination shopping malls
and entertainment centres.
Despite the number of vacancies in the north west
of the island, which tend to be the preference of
families and those working across the causeway, in
Saudi Arabia, the occupancy rates in newer and
well maintained compounds that provide facilities
have yet to suffer significantly.
In terms of development and the sales market, a
bias for action is evident; following the slow-down
that resulted from the wake of the economic crises
and subsequent political unrest that affected
activity over the past decade, activity is cautiously
increasing.
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 majority of investors in freehold
property to date at Durrat Marina have been
local and GCC nationals and it is anticipated
that sales for Layan will draw mostly from this
market.
Juffair remains a popular choice in terms of
affordable investment opportunities for both
locals and expatriates. The recently announced
RM Kooheji & Sons, a $30-million project,
Nasmah Star will provide 137 two and three
bedroom apartments, including duplex
options. At 26 storeys the tower is expected to
be completed in 2018. Other developments set
to come on stream over the next 24 months in
Juffair include Orchid Plaza, Juffair Heights
and Spark Residence. Several luxury
developments are also to add to future supply
in the residential sector in Seef, particularly in
the vicinity of City Centre mall.
Figure 5 Growth in Juffair Freehold Apartment Supply (2009 to F. 2018)
6,000
1,400
5,000
1,000
4,000
800
3,000
600
2,000
Cummulative Supply
New Apartments Per Annum
1,200
400
1,000
200
Number of New Apartments
2018
2017
2016
2015
2014
2013
2012
2011
2010
0
2009
0
Growth in Supply
Source: CBRE Research 2016.
Q1 2016 CBRE Research
© 2016 CBRE, Inc. |
4
M A R K E T V I E W BAHRAIN COMMERCIAL & RESIDENTIAL
CONTACTS
For more information about this MarketView,
please contact:
R i ch a r d B o t h a m
Senior Director
+973 1655 6606
richard.botham@cbre.com
Ja m e s L y n n
Director
+973 1655 6613
james.lynn@cbre.com
Heather Longden
Associate Director
+973 1655 6602
heather.longden@cbre.com
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Manama, Bahrain
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