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Bahrain real estate posts growth on high oil, government initiatives

November 22, 2022
real estate

The third quarter of 2022 has seen all sectors in Bahrain’s real estate market experience growth, underpinned by government initiatives and an improving economic outlook, according to analysis carried out by global property consultancy, Knight Frank.

The kingdom's residential market has witnessed solid growth, registering a 3.2% growth in the number of transactions when compared to last year, it stated.

Faisal Durrani, Partner and Head of Middle East Research, Knight Frank, said: 'The tentacles of Economic Vision 2030 are spreading throughout the economy and business confidence is rising.'

'This, coupled with sustained high oil prices and the government’s forward-thinking initiatives, such as the $30 billion set aside for real estate projects that encompass all sectors is starting to pay off as evidenced by rising prices and deal activity,' he stated.

Knight Frank pointed out that the increases in deal activity came despite the 4.3% rise in average apartment prices, which now stood at about BD810 per sq m.

Villa prices were also up about 4.5% on last year, stated the top consultancy. Villa lease rates too have increased by an average of close to 8%, so there has been some yield compression, it added.

Durrani said: 'With over 45,000 new homes planned around the country, yields may start to move out once more, should demand not be able to keep pace with the upcoming supply. The current challenge to the residential market’s upward trajectory will of course be rising base rates and the impact on mortgaged buyers.'

On the commmercial market scenario, Knight Frank said rents were slowly starting to rise in the office market as economic confidence beds in. Indeed, with economic growth forecast to accelerate to 4.4% during 2022, business confidence is rising, it stated.

'Anecdotal evidence suggests that organisations that implemented hybrid working arrangements are now returning to full occupancy, driving up demand,' remarked Stephen Flanagan, Partner and Head of Valuation & Advisory, Mena.

Bahrain's business environment continues to improve, with new labour laws designed to protect workers as well as employers’ rights aiding business confidence, he stated.

'While lease rates remain relatively low, especially when compared to other Middle East hub cities, they have edged up by 1.6% this quarter and now average about BD63 per sq m, with Bahrain Financial Harbour retaining its position as the most expensive location to rent an office in Manama at BD72 per sq m,' observed Flanagan.

Elsewhere, Knight Frank reported that warehouse rents are on the rise, growing by 2.2% in the most recent quarter and currently average BD 35 per sq m.

'Like elsewhere in the world, higher quality warehouses are in most demand and command a rental premium,' explained Flannagan.

'Indeed, Edamah has just broken ground on its 87,382 sq m Sitra Logistics Park to tap into this burgeoning demand for high-quality warehouses,' he stated.

Durrani pointed out that the manufacturing and logistics sectors were contributing to the rapid rise in requirements.

'In fact, the first nine-months of the year has seen these sectors attract $290 million in investment, which will see 1,200 new jobs created through 25 different companies; decision to establish a presence in the Kingdom,' stated the expert.

According to Knight Frank, Bahrain's retail market has experienced increased activity in the first half of 2022, with both lease rates and occupancy levels rising,

Monthly retail rents in Bahrain average between BD140 to BD220 per sq m, with super regional malls commanding rents in excess of this.

New retail supply in Bahrain is likely to continue to trickle onto the market. In fact, Avenues Mall Phase 1 contributed around 40,000 sqm to the overall supply, it added.