The commercial office sector of Bahrain remains subdued, with Grade A and B rental rates having seemingly bottomed out with no significant improvement in performance recorded this year.

This is according to the third-quarter Bahrain MarketView report by global property consulting firm CBRE, said a report in the Gulf Daily News (GDN), our sister publication.

“This is largely due to the prevailing oversupply situation,” said CBRE Bahrain Middle East Research director Steve Mayes.

“International class developments, such as Bahrain Financial Harbour and the World Trade Centre have yet to alter pricing strategies in response to changing dynamics brought about by a continued shift in demand from both international and local occupiers,” he added.

The market is now more orientated towards smaller fitted spaces of under 150 sqm.

This trend has risen from occupiers seeking to limit capital expenditure, preferring turnkey solutions and shorter lease terms to reduce risk through greater flexibility.

“We are aware of leading international serviced office providers expanding in the kingdom, which reflects this growing trend,” noted the report.

Vacancy rates currently average around 25 per cent, with new developments nearing completion, such as the United Tower and Al Baraka Bank Building at Bahrain Bay, to be added to the existing prime office stock in the first half of 2015.

“Occupier demand for larger traditional space stems primarily from government associated institutions and we are aware of ministries leasing multiple floors in Bahrain Financial Harbour and some other newer developments in Diplomatic Area,” Mayes said.

“However, this remains generally unattractive to smaller occupiers with well-documented congestion issues and lack of parking provision for some of the older office towers,” he added.

According to the CBRE report, demand for residential leasing has remained relatively steady over the past two quarters, with areas including Juffair and Amwaj Islands remaining popular choices for those new to Bahrain and US military employees.

Over the past 12 months, the rental market has experienced a fragmented performance with growth trends seemingly location specific and dependant on the nuances of each micro-market.

“Projects in Seef and Reef Island have witnessed a noticeable increase in sales activity from 2013, a trend which has resulted in a 10 per cent year-on-year increase in sale prices,” Mayes said.

“Similarly Amwaj Islands, considered a 'safer' option, continue to attract local and foreign investors alike, as the area develops as an attractive community proposition with retail, hospitality and entertainment components already in place,” he added.

Saar, Budaiya and Janabiyah, which were hit by the unrest, have seen a surge in demand as access to these areas has improved, said the report.

Retail developments designed to serve the local community, such as Nakheel Centre and Saar Mall, are also contributing to the renewed appeal.

“Riffa Views also continues to grow in popularity and has become firmly established with the western expatriate community and local communities alike,” the report added. - TradeArabia News Service