Bahrain’s retail sector remains resilient as residential and office markets soften

MANAMA / EMIRATES BUSINESS

Cluttons’ Bahrain Spring 2016 Property Market Outlook Report shows that retail at Al Seef continues to command the highest rents at BD 12.50 psm, representing a 4% increase over the 12 months from Q1 2015.
Following closely behind Al Seef is Amwaj Islands, which has seen a rental increase of 33% since Q1 2015, to stand at BD 12 psm in Q1 2016. However, the report indicates that the overall picture of stable rents suggests that the market may be approaching a supply-demand equilibrium, with the level of new entrants tailing off.
Harry Goodson-Wickes, Head of Cluttons Bahrain said, “We continue to see demand for retail across Bahrain with budgets remaining stable around the BD 12 psm mark. However, if supply continues to edge ahead of demand, headline rents may fall. Rents will also be impacted by the general economic slowdown that the Kingdom is facing and it will likely cause increased downward pressure as demand stabilises this year.”
Cluttons’ report shows that existing food and beverage (F&B) operators are amongst the most active groups in the retail market at present. The Mesk Restaurant Complex (MRC) in Adliya for instance, has been registering strong interest from F&B operators looking to take up space.
Goodson-Wickes commented: “The Kingdom’s retail sector is still perceived as being a key retail and hospitality hub for Saudi Arabia, with the weekend tourist traffic being a particularly big draw for domestic and international retailers. In addition, the government is focusing on its strategy to attract high end tourists, which is driving an upturn in the number of five star hotels. However, we believe the family market remains vastly underserved, but there are signs to suggest that developers are now seeking to target this segment.”
Elsewhere in the commercial market, Cluttons data shows that office rents have remained unchanged between Q4 2015 and the first quarter of 2016, with the Financial Harbour and World Trade Centre retaining the top spots as the most expensive buildings for occupiers.
The vast majority of occupier activity in Al Seef is being driven by a small amount of relocation activity within Manama, rather than by new entrants. While cost saving is the main driver behind the relocation of many businesses, some are taking advantage of the record low rates and using the weakness in the market to upgrade to more modern facilities.
In the residential sector, the first quarter of 2016 marks the second consecutive quarter of rental stagnation. As a result, the annual rate of change decreased from 5.2% at the end of last year to 4.4%, at the end of Q1 2016. In Q1 2016, apartments on Amwaj Islands saw no change in rents, equating to an annual change of – 2.3%, which translates in to a little over BD 700 per month, on average.