DTZ the expert real estate advisory firm today released a market report on Bahrain giving a detailed examination of the state of the Kingdom’s real estate sector and a healthy prognosis for 2008.
The report gives an overview of the Bahrain real estate market across residential, commercial and retail sectors. Top line findings are that significant growth is expected through to 2012 across residential and commercial sectors, with the Kingdom remaining a highly competitive market ripe for investment across both. Growth is also predicted for retail real estate, though the report emphasises the danger of over-supply in this sector.
According to the report, Bahrain’s residential real estate sector is set for a successful year fuelled by strong local demand, relaxed foreign ownership regulations, strong levels of liquidity in the regional market and improved financing options. Although more than 90% of those buying property in Bahrain are Bahrainis, the report highlights an increase in non-national investors, mostly from Saudi Arabia. This trend is matched with increased monthly rental prices, with prime monthly rents in the Seef area ranging from BD 850 a month for a two bedroom apartment to BD 1,800 per month for a four bedroom villa.
Robert Addison, DTZ’s Country Manager of Bahrain and Director of EMEA Retail, said:
“The Bahrain residential market still represents an excellent opportunity for investors. With a number of high-end mega-projects currently in development, those looking to buy a luxury property can still do so in Bahrain at a fraction of the price currently being recorded in other markets such as the UAE.”
The report describes a different type of growth for Bahrain’s commercial real estate sector. It estimates a total of more than 1,000,000 square metres of office space across the Kingdom by 2012, a one hundred per cent increase on the 500,000 square metres currently available.
Prime rents for office space across the Kingdom range between BD8-10 per square metre per month in Central Manama and BD10-12 per square metre per month in Manama’s Diplomatic Area, reaching highs of BD30 per square metre in the higher floors of the Bahrain World Trade Center.
DTZ predicts current demand for office space at 79,000 square metres, of which 30% is active and 70% is potential. This is driven by banks and financial institutions, which accounts for 35% of total requirements. This demand is generally for relatively small units ranging between 200 and 450 square metres, and the report predicts a significant rise in office rents in the short term as initial demand for these size of units remains unmet until large developments come online in 2011.
Commenting on the commercial market, Addison said:
“By 2012 the market for commercial real estate in Bahrain will have transformed, with the Kingdom’s current office space doubling by that point. Despite this, we predict that developers will phase development in a way which avoids a glut and we expect to see a rent increase in the short term, at least as Bahrain’s economic growth exceeds available space.”
The third sector covered by the report is retail space which has seen a period of sustained and significant growth in past years. There are now more than 18 shopping malls on the island, with a total Gross Lettable Area (GLA) in the Kingdom’s malls of around 280,000 square metres.
This GLA figure is set to more than double in the next five years, with over 370,000 square metres in the development pipeline, including the retail components on some of the island’s mega-projects. Although the retail market is currently seeing significant success in 2008, this growth cannot be sustained with a consumer base of Bahrain’s 800,000 residents alone. The Kingdom will instead look increasingly to the external demand represented by foreign visitors in its immediate catchment zone, including the 6.2 million people expected to enter the country via the King Fahd Causeway to Saudi Arabia this year.
Addison summarised the challenges facing the retail market:
“As new schemes enter the market, competition will intensify to attract consumers. We predict that older malls, and those which are not best configured to appeal to retail customers, will find it increasingly difficult to occupy units and command prime rents. For some, this may mean redevelopment or a change in focus.
“The retail market is rapidly evolving and customers are becoming more discerning and we predict that only well-designed and well-targeted projects will be successful in the medium to long term.”
The Bahrain report represents an important step for DTZ, which has been operating in the region since 1975. Robin Williamson, Managing Director of DTZ Middle East Operations, said:
“DTZ’s global reputation is built on industry-leading research and the knowledge and expertise of our people in their local markets. We are happy to share key findings from our work in the Gulf with the larger community, which we hope will encourage debate and help inform those looking to invest in real estate in the region
“Bahrain is a key market for us – an example of a Gulf state with a long-held tradition of openness and friendliness to investors and developers alike. The top-line findings of our report reflect our confidence in the resilience of the Bahrain real estate market and in its ability to compete with the region’s other success stories.”
This report is the product of DTZ’s regional research team and is the first in a series of reports to be released by DTZ to focus specifically on the real estate market in the Middle East. Other reports published by DTZ globally include the industry-renowned Money Into Property report, published annually and covering investment in real estate around the world.
DTZ is the most established firm of real estate advisors in the Middle East, with its first permanent operations beginning in 1975. Today, DTZ has a presence in six GCC locations (Abu Dhabi, Dubai, Bahrain, Kuwait, Qatar and Saudi Arabia), and is currently undergoing aggressive expansion across the region to match a growing high-profile client list. Each DTZ office provides a full range of real estate services staffed by qualified expatriates and experienced Nationals.
