Bahrain residential market 'picks up'
Manama, January 29, 2013
The activity in the residential market across Bahrain picked up during the fourth quarter with the apartment and villa rental rates registering solid growth, while secondary market sales continue to show modest gains, said a report.
Leading property expert CBRE said the residential leasing market continued to show some life despite the slowdown across virtually all major employment sectors.
In contrast, the office sector continued to be quiet with few movements in or out of the market and a slowdown in ministry movements, said a report.
"Activity continues to pick up in the apartment sector, while secondary market sales continue to show modest gains in selected locations," it revealed in its "MarketView- Q4 2012."
However, CBRE pointed out that many of the compound locations continued to see a very slight slip downwards in both occupancy and rental rates.
Although the Kingdom continues to witness an ongoing political stalemate, both Fitch and Standard &Poors have maintained their relatively positive views of Bahrain’s long-term sovereign credit ratings.
Fitch maintained Bahrain’s foreign currency rating at BBB with local currency at BBB+, while S&P maintained both at BBB.
The EDB announced that during the second quarter, non-oil growth was up 8.1 per cent on 2011 and analysts polled by Reuters at the end of the third quarter, said they anticipated real GDP growth to be 2.8 per cent in 2012.
The other GCC states too have been quick to show their support for the Kingdom through a series of initiatives both individually and collectively.
The GCC states have collectively allocated $10 billion for use in developing the Kingdom’s housing and infrastructure. Kuwait has independently announced a grant of $273 million for two projects, the bulk of which is earmarked for expanding and upgrading Bahrain’s electricity network.
In addition to this major infrastructure development, the Kingdom is planning a number of other large-scale initiatives, including $4.8 billion directed to the state-owned oil company, $2.2 billion into the state aluminium entity and $1.2 billion into Gulf Petrochemical Industries Company.
In addition, Bahrain is moving forward with major plans to grow gas production from the current 1.5 billion cubic feet per day, to 2.5 billion in 2020.
Kingdom Holding Company chairman Prince Alwaleed bin Talal has also indicated strong support for the Kingdom by announcing that both his Rotana media group and Alarab news channel will be relocating their headquarters to Bahrain.
On a slightly more disappointing note, escalating costs for the construction of the ‘Friendship Causeway’ linking Bahrain to Qatar have prompted a review of the project which seems likely to delay its completion by several years, said the CBRE report.
On the prime office markets, CBRE said the location in Seef District was the most preferred one by Mid to premium office occupiers in Bahrain.
"There continues to be weak sentiment for the new and existing space in Diplomatic Area which continues to suffer from poor access, circulation and parking despite the loss of many tenants over the last few years," said the report.
Spatial requirements continue to be focused on the smaller end of the spectrum and occupiers remain highly sensitive to rental rates and continue to seek fitted offices in order to minimise capital expenditure.
The new buildings which continue to be offered on the traditional ‘shell and core’ basis remain deeply unattractive to the market, and there is a stand-off between potential tenants and landlords over the capital expenditure required to occupy available spaces.
The Shaikh Khalifa Bin Salman Highway, which essentially forms the northern cornice, has recently been expanded into a six lane highway in places and this has significantly improved access along this stretch of highway for office workers travelling to established commercial areas such as Diplomatic Area.
However, access within Diplomatic Area itself remains problematic, and the appeal of the area remains weak.
On the Office market outlook, CBRE said rental rates have remained steady for several quarters now and barring any major unforeseen events, we consider that this to be the bottom of the current rent cycle.
"This does not necessarily mean that there will be a rapid return to rental growth as the market enters the next phase, but it does mean that we are now all waiting for the anticipated upturn in economic conditions which should lead to the absorption of existing empty spaces and ultimately, rental rate growth," it added.
On the residential scenario, the lack of available and/or suitable accommodation in Eastern Province, together with the more relaxed environment for westerners in Bahrain, is driving housing requirements for the growing number of expatriates employed in Saudi Arabia, which is in turn being driven by the oil and gas boom in particular.
However, this is creating a very site-specific opportunity in Bahrain, primarily for those compounds in and around the Hamala area (on the west coast of the Kingdom), from which expatriates can undertake the daily commute to Eastern Province via the causeway, the CBRE report stated.
In the apartment rental sector, rates at Amwaj islands remain firm together with high occupancy, and the area remains popular among the younger professional expatriate crowd, according to CBRE.
Although there have been several high profile apartment project failures in this area, there are few new properties available and choices for incoming tenants are relatively limited and prices relatively high.
The most popular locations for apartment tenant enquiries continue to be on Reef Island and in Juffair, the first for proximity to the commercial office and retail district of Seef together with the availability of new properties, and the second for the selection of competitively priced, brand new properties that are still available, it stated.
Amongst the more price-sensitive expatriate population, Adliya and Mahooz, which lie on the southern outskirts of Manama, remain the key locations, but the presence of large, ageing properties has led to the growing phenomenon of unscrupulous landlords leasing their properties to third parties who then lease them for ‘worker accommodation’ purposes.
These buildings often end up with high numbers of male expatriate tenants and are located in the middle of otherwise normal residential districts. Attempts to regulate this type of activity have come to nought so far, with the major stumbling blocks being proof and enforcement.
CBRE said the residential sales continue to pick up albeit slowly and in specific pockets. It remains difficult to address the needs of the ‘affordable’ market for a number of reasons, it added.-TradeArabia News Service