Dubai: While Bahrain’s real estate market has seen a general improvement so far this year, this is unlikely to translate into rising rents or capital values in the short to medium term, a report said.
According to consultancy Knight Frank, there is still a “significant overhang” of office space in the market, and aggregate demand is “unlikely to see a significant uplift in the near-term”.
Despite office rents showing signs of finding a floor, at 9 Bahraini dinars per square metre per month, prime rents are currently around 40 per cent below their 2008 peak. “What’s more, Grade A and B have seen similarly large falls. Thus, oversupply and lower corporate profits have hit all three segments fairly similarly,” the report said. However, over the next 12 months, with development activity expected to remain subdued, it is expected that the downward pressure on rents to abate.
In the first half of 2014, occupier demand was limited to small pockets of Bahrain’s office market. Small, fitted-out units remain most popular, especially among those tenants looking to avoid the upfront costs of carrying out the work themselves. Occupiers are also showing a greater preference for shorter leases in order to give them the flexibility to relocate in case of changes in circumstances. In addition, the office market is currently experiencing “churn”, with hardly any new corporate tenants entering the market.
While vacancy rates across Grade A and B stock remain high, best-in-class buildings such as Almoayyed Tower, Bahrain World Trade Centre and Bahrain Financial Harbour continue to see healthy levels of demand. Moreover, going forward, these buildings are likely to continue to benefit from high occupancy levels as tenants continue to target prime office space.
