Work on major infrastructure projects in Bahrain, mostly linked to the kingdom's hospitality and luxury segment, will continue despite financial challenges, according to a report by leading property consultancy firm CBRE.
According to figures released by Bahrain’s Economic Development Board, in Q3 2016, growth was led by the non-oil sector, with a reported 4.7 per cent growth. This was driven by the construction sector, which expanded by an annual 7.2 per cent, stated the industry expert in its Q4 2016 Bahrain MarketView.
Development activity across the retail market (regional, sub regional and neighborhood) continues to grow in the Kingdom, said the report.
According to the CBRE Bahrain MarketView, the hospitality sector and luxury segment continues to see growth in development. The 2015 announcement of the influx of 4-star and 5-star hotels continued to trend in 2016, with a number hotels and branded residences planned to open in 2017.
There are currently 111 hotels operating in Bahrain, with the most recent opening being the Downtown Rotana.
However, this figure is set to rise, with the Wyndham Grand at Bahrain Bay and the Marriott Residence Inn at Water Garden City planned to open in 2017 along with The One & Only Resort, satted the report.
Rental rates at sub regional shopping malls average BD28 ($74) per sq m per month for in-line stores and in the range of BD12 ($32) per sq m per month for neighburhood shopping centers.
Swedish furniture developer IKEA is also expected to launch its 37,000 sq m development in late 2018 and the BD47 million ($124 million) project is planned to be the largest store in the Middle East with a self-serve and full serve area.
Heather Longden, the associate director, CBRE Bahrain, said: “The forefront of retail development is The Avenues, an Alshaya Group led project, at Bahrain Bay Corniche, phased to open partly in late 2017. The development is expected to provide 38,000 sq.m of total leasable retail space and an impressive range of facilities.”
James Lynn, the director at CBRE Bahrain, said the positive development in Bahrain has raised concerns over whether demand will be able to absorb the increase in stock.
"However, information released by the EDB paints a positive picture, with a rise in visitor numbers to more than 12.2 million people in 2016, up by 6 per cent from 2015 and the overall hospitality sector growing by 7.3% annually in 2016," he pointed out.
According to him, take up rates, occupancy levels, rental and sales rates remain stable with the majority of the residential use of smaller and larger projects being a popular choice for developers in Bahrain.
“The Bahrain Marina project is in the pipeline to be completed by 2020 which will span a large portion of the East coastline in Manama and will comprise residential, entertainment, leisure and marina facilities,” explained Lynn.
According to the Q4 2016 MarketView, Juffair and Amwaj Islands and Seef District opposite the City Centre Mall, also continue to be popular as personal investment choices, particularly for GCC nationals.
An average of two-bedroom mid to high range apartment units generally targeted at the expatriate market, are now rented for between BD500 and BD800 per month.
These are fully furnished and typically inclusive of municipal taxes and utility charges as well as Internet and satellite TV connections. One-bedroom units are typically priced between BD400 and BD600 per month and a three-bedroom apartment ranges between BD900 to BD1,300 per month, depending on location, stated the CBRE in its report.
The office market favours commercial occupiers, with attractive rental rates and incentives for businesses looking to invest in the Kingdom.
The commercial office market is currently facing a competitive landscape, segmented between landlords offering traditional space and those offering flexible affordable fitted/furnished solutions.
Key developments across the Grade A segments, such as Bahrain World Trade Centre, Bahrain Financial Harbor and the anticipated pre-leasing stage of the United Tower at Bahrain Bay, are all due to open in H2 2017.
These will provide highly competitive rental rates and incentives, such as extended free rent and contribution to fit out works in order to attract tenants.
“Rental rates reduced year-on-year from 2015 to 2016 due to the decreased demand which further impacted rent across the board. Average quoted rental rates currently stand at BD7 per sq.m per month, plus service and other charges. The combined Grade A and Grade B asset classes have had limited development, with a prevalence towards residential, retail and mixed use projects,” Longden added.
Manara Development’s Investment Gateway at Hidd recently announced completion of infrastructure works worth $66 million on the 600,000 sq.m project offering approximately 394 plots in the first phase.
Of this, 41 plots have been dedicated for offices and showrooms, and 252 plots for warehousing, handling services, sales services and light industry, in addition to 101 plots that are designed to accommodate three-storey commercial buildings.
Based on strong uptake for Phase One, the second phase is scheduled for 2018, said Longden.
“We are working with occupiers from Europe and the GCC currently, to secure light industrial space within the country’s 8 industrial zones at present with initial requirements for space between 4,000 – 7,000 sq.m,” she added.