Bahrain office market has bottomed out, says CBRE
Rents have stopped falling but quick return to growth remains unlikely
Bahrain's property market appears to be reaching the bottom of its cycle, with office occupancy and rental rates stabilising and the supply of new offices coming onto the market beginning to slow, according to a new report.
CBRE's Bahrain Marketview for the final quarter of 2014 states that the Kingdom's economy was showing signs of recovery with a Reuters poll of analysts suggesting that they anticipated GDP growth of around 2.8% in 2012.
Bahrain's banking sector, which had suffered during the political crisis that took place in the country in 2011, has also rebounded, while a promised injection of $10bn from other GCC states will help to overhaul the country's state-owned oil firm and its aluminium industry.
Moreover, although the firm said that the Kingdom's office market remained "quiet" during the quarter, with few investments in or out of the market, office market "have remained steady for several quarters".
"Barring any major unforeseen events, we consider this to be the bottom of the current rent cycle," the report said.
"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 we are now all waiting for the anticipated upturn in economic conditions which should lead to the absorption of existing empty spaces ."
It said that demand for office space remained low, particularly in the Diplomatic Area which has poor access, circulation and parking. Fitted out space in the Seef district with parking and rent-free periods remains an easier sell to potential tenants.
Meanwhile, the firm said that the residential leasing market remains active despite a slowdown in employment rates.
"Activity continues to pick up in the apartment sector and rental rates have finally stabilised in most areas.
"However, we note that many of the compound locations continue to see a very slight slip downwards in both occupancy and rental rates.
"This combination of factors appear to indicate that the troubled political environment in Bahrain is making the Kingdom less appealing for expatriates with families with the shortfall being taken up by expatriates on bachelor status.
The boom in the number of oil and gas projects in Saudi Arabia's Eastern Province is creating a demand for expatriate housing in parts of Bahrain, but CBRE said these are "site-specific" opportunities in compounds around Hamala on Bahrain's west coast close to the causeway.
Apartments in areas such as Reef Island and Juffair also remain popular - the former for its proximity to the financial district and the latter for its "competitively priced, brand new" stock.
The report said that residential sales are beginning to pick up, but only slowly and in certain pockets.
The delivery of much-needed affordable housing is unlikely to be addressed soon, however, with CBRE blaming a number of factors including high land prices, expensive mortgage financing and difficulty in assembling large-scale sites with the required infrastructure.
"At present, this sector remains largely off the development radar, with developers either engaged in middle or high-income building projects."