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Bahrain's landlords woo tenants with lower rates, rent-to-own schemes

October 4, 2021
real estate

Tenants in Bahrain, where villa and apartment rents have declined, continue to hold bargaining power over landlords, according to CBRE, a commercial real estate and investment firm.

To attract tenants and avoid high vacancy rates, property owners are now offering incentives, such as lower rates and rent-free periods.

At the same time, developers are enticing potential buyers with rent-to-own schemes, as well as attractive payment plans and guaranteed returns, CBRE said in its latest report on the trends driving the kingdom’s real estate sectors.

“Bahrain is increasingly a tenant-led market, with tenants having greater bargaining power and flexibility in negotiating with landlords,” the report said.

CBRE said that landlords in the country are expected to continue to offer lower rents to be competitive with tenants having greater bargaining power and flexibility.

New builds with outdoor space and extensive facilities on site are performing better than those without.

The affordable and social housing segments dominate demand in Bahrain with the government-backed loan scheme, Mazaya, providing the millennial generation with the opportunity to purchase first homes.

Developers are offering rent-to-own schemes, attractive payment plans and guaranteed returns, to attract investor and owner-occupier demand, stated the report.

On the office space in the kingdom, CBRE said occupiers are expected to take advantage of subdued market conditions and continue flight to quality as vacancy rates remain significant.

Bahrain is the most cost-effective location in the GCC to set up offices, and a CBRE survey on the country shows 60 per cent of respondents in the country prefer to work from the office.

The CBRE report stated that physical offices were here to stay; with portfolio optimisation and a well-managed remote working strategy.

It also noted enhanced demand from local tech and fintech start-ups with key government initiatives being introduced across the region to support and encourage innovation and technology.

There’s a significant increase in second generation space entering the market over the last 12-18 months, with this trend likely to continue, placing further pressure on rental performance as supply increases and demand is limited.

Looking at the retail segment of the market, the report says increasing pipeline supply will maintain downward pressure on rents in the kingdom.

Landlords in Bahrain have supported tenants during periods of trading restrictions as a result of Covid-19 to varying degrees.

Store design optimisation and omnichannel strategy introductions are expected to allow for faster recovery and better profitability, the report said.

Landlords with flexible lease terms, malls with flexible/convertible/open spaces will witness greater retailer interest.

Drive thrus remain popular as are plazas that offer a rounded experience, it added.