Property sector ‘showing signs of revival’

MANAMA: Bahrain’s residential real estate market witnessed an increased level of activity in the second quarter of this year, a leading consultancy has found.

In its latest MarketView report, CBRE said a number of new developments were announced during the second quarter.

Economic growth showed positive signs in the first quarter as oil output were revived. Employment in the kingdom also rose significantly over the last year, largely on the back of a programme of real estate and infrastructure projects, the report said.

Annual gross domestic product growth to the end of the first quarter this year rebounded to 4.2pc.

The Bahrain workforce grew by 6.7pc in the year to end of the first quarter largely driven by construction and infrastructure projects.

“We have started to see some upward movement in transaction numbers and prices outside central areas, but rental rates remain fairly stable for now,” CBRE Middle East head of research and consultancy Mike Williams said.

“In terms of the rent cycle, the market remains in a balanced situation awaiting the return of positive rental movement in all major sectors.

“Land plots, however, continue to be largely unaffordable or unavailable to the general population creating more pressure on housing needs.

According to CBRE, there remains little activity in the prime office market, which is now spread across the northern part of the kingdom, in Seef District, Diplomatic Area and Bahrain Financial Harbour.

Rental rates remain subdued with new business mainly restricted to consolidation and rationalisation activity in previously used spaces that offer fitted-out accommodation.

“Vacancy rates vary widely as do rental rates with tenants now able to dictate terms,” he said.

“There is only marginal downward movement for the renewal of leases held by those who have already undertaken expensive fit-out programmes but new tenancies are being (relatively) hard fought over although most landlords appear now to have reached their bottom price and suite of incentives,” Mr Williams added.

“In the investment sector, the realisation that the market has ‘bottomed out’ seems finally to have stimulated the thoughts of those investors who have been waiting for several years for a ‘bargain’.”

According to him, the reality that rents and therefore values or prices are more likely to rise over the next few years rather than fall further, has prompted renewed enquiries for the better, prime commercial properties.

“Properties with existing, quality tenants on long leases, with good management and in prime locations are now being actively considered with several deals on the verge of completion after a long period of dormancy in the investment market.”

Finally, the hospitality sector saw the announcement of a raft of new hotel projects in the second quarter.

“We anticipate that the confluence of summer and Ramadan will, as usual, create a general slowdown in development activity, but this is usually the period during which we see developers commission their feasibility and best-use studies for review on their return to the kingdom after the break,” he said.

“The level of this kind of business during the next quarter will at least provide some indicators for developer appetite,” Mr Williams said.

GDN, July 23, 2013