Bahrain’s real estate market posts growth

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All sectors in Bahrain’s real estate market grew in the third quarter of this year, with government initiatives and an improving economic outlook providing the impetus, according to Knight Frank.

Analysis by the global property consultancy shows that increases in deal activity (up 3.2 per cent in Q2-2022) in the kingdom’s residential market come despite the 4.3 per cent rise in average apartment prices, which now stand at about BD810 per square metre.

Villa prices are also up about 4.5pc on last year, whereas villa lease rates have increased by an average of close to 8pc, indicating some yield compression, the firm added in its ‘Bahrain Real Estate Market Review – H1 2022’.

Faisal Durrani, partner and head of Middle East Research at Knight Frank, 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.”

Mr Durrani added, “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.”

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 4.4pc during 2022, business confidence is rising.

“Anecdotal evidence suggests that organisations that implemented hybrid working arrangements are now returning to full occupancy, driving up demand,” said Stephen Flanagan, partner and Mena head of valuation and advisory at the firm.

“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 1.6pc this quarter and now average about BD63 per sqm, with Bahrain Financial Harbour retaining its position as the most expensive location to rent an office in Manama at BD72 per sqm.”

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

Mr Flannagan 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 87,382sqm Sitra Logistics Park to tap into this burgeoning demand for high-quality warehouses.”

According to Mr Durrani, the manufacturing and logistics sectors are contributing to the rapid rise in requirements in the market.

“In fact, the first nine-months of the year have 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,” he added.

Finally, Knight Frank’s report on Bahrain’s retail market found increased activity in the first half of 2022, with both lease rates and occupancy levels rising.

Monthly retail rents in the country average between BD140 and BD220 per sqm, 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 40,000sqm to the overall supply.