Friday, September 18, 2020

Cluttons: Retail Market Expected To Remain A Bright Spot

With positive government interventions to bring in more investors and diversify Bahrain’s real estate market, retail remains a significant area of growth in the Kingdom’s property sector. The renewed confidence amongst retail occupiers and retail developers is especially reflected in the fact that retail rents have remained stable over the last six months, according to leading international real estate consultancy, Cluttons.

Commenting on the Bahrain Winter 2017/18 Property Market Outlook, Faisal Durrani, Head of Research at Cluttons, said, “Retail is playing a central role in helping various areas in the Kingdom realise their full potential, with residential tenants being drawn to areas that offer high levels of retail penetration. We have noted an upturn in the number of community retail developments in locations such as Juffair, while larger shopping malls, such as the BD 45 million ‘The Avenues’, are being seen as game changers for the Kingdom’s retail scene.

We expect some 78,015 sqm of new retail space to be delivered across Bahrain this year, increasing to approximately 93,000 sqm in 2018 and in excess of a further 455,000 sqm by 2020. Separate to the development of retail malls, the Gulf’s largest IKEA is on track to open next year at a cost of BD 47 million and is expected to create up to 600 new jobs.”

Cluttons research highlights that the depth of developers’ confidence in the sector is reflected in the fact that it is currently tracking 21 retail schemes, spread across more than 1.05 million sqm, at a total cost of over BD 277 million. All projects are due to be completed between now and the start of 2020.

Harry Goodson-Wickes, Head of Cluttons Bahrain and Saudi Arabia, said, “The desirability for developers to select existing communities for new schemes has also been fuelled by the strong penetration of retail developments in many of Bahrain’s established residential areas. An example of this is the Marassi Boulevard, which consists of four low-rise buildings, with over 240 homes, alongside 700 sqm of retail and access to a 2km private beach and waterfront promenade. The success of the development is likely to be further enhanced by its proximity to the 180,000 sqm high-end Marassi Galleria retail development. We expect the development’s position, adjacent to Amwaj Islands, in addition to the strong community infrastructure being provided, is likely to result in keen interest from both buyers and tenants.”

Residential Market

Cluttons report shows that after rents retreated across the board at the start of the year, the market appears to be entering a period of stability, with average rents across the Kingdom firming during Q3. Rents in general have weakened by an average of 16.2% when compared to this time last year, and are down by roughly 8% since the start of 2017. In general, villas have outperformed apartments, however rents have dipped by 11% over the last 12 months. On the apartment front, rental rates in Juffair have experienced some of the sharpest corrections.

Goodson-Wickes commented, “For more than 18 months now, we have highlighted the risk of oversupply of apartments in Juffair and we appear to have reached a tipping point, where supply has exceeded demand. That said, with roughly 5,000 units being completed each year, there may be the potential for these units to be absorbed by domestic buyers, provided they are priced under BD 120,000 in order to qualify for a social housing loan. As it stands, the Ministry of Housing has a social housing waiting list of approximately 55,000, so demand appears as though it may exceed supply. However, many of the schemes currently under development are geared towards the luxury end of the price spectrum. Oversupply remains an area of concern and something we continue to monitor closely.”

Commercial Market

 According to Cluttons Bahrain report, elsewhere in the Kingdom’s commercial market, demand for office space remains lacklustre and static, with a very limited number of enquiries. Encouragingly, rents for both fitted and shell and core space have remained stable since the start of 2017. This is in part linked to the sharp rent corrections that have been recorded since 2010; shell and core space is down by roughly 40-70%, while rents for fitted space are down by a third to half over the same period.

While overall demand remains weak, start-up businesses are active in the market. Additionally, the only noteworthy activity amongst international occupiers has been Amazon’s decision to make Bahrain a regional hub for its cloud computing services, which will see the creation of three data centres in the Kingdom by 2019.

Outlook for 2018

Cluttons report shows that aside from the clear risks to overall demand levels for both residential and commercial property that stem from any further weakness in oil prices, a number of downside risks are being monitored, including value added tax (VAT) and infrastructure levy.

While Saudi Arabia and the UAE have forged ahead with plans for VAT, commencing on 1 January 2018, Bahrain is yet to declare its intentions on the formal roll out of a VAT regime. The implications of VAT in Bahrain are likely to be a spike in inflation, which may dent consumer confidence and spending. This would, of course, come in addition to the gradual erosion of state food and energy subsidies, placing household finances under further strain. The impact on the property market is still unclear, but if the Kingdom followed in the footsteps of the UAE by taxing all commercial sales and lease transactions, demand is likely to weaken further, driving down rents from their current low levels. However, if the Kingdom follows the Saudi Arabian authorities’ decision to tax buy-to-let residential property, there is likely to be a weakening in Bahrain’s second homes market.

Goodson-Wickes concluded, “While our expectation is for rents to remain firm this year, the retail market is expected to remain a bright spot in the Kingdom’s property market. 2018 is likely to see rental rates remaining firm once more as more supply comes online to match anticipated demand. The residential rental market in Bahrain, however, is likely to remain stable for the remainder of 2017 and to continue this stability into 2018, as the market absorbs the falls registered this year. This is, of course, predicated on the residential market being exempt from any form of VAT. As for the commercial market, the sharp corrections that have occurred in recent years have driven rents to all-time lows. This is why our view for 2017 is for flat growth, while 2018 may well see further falls in headline asking rates should VAT be imposed on the commercial office market, as is the case elsewhere in the GCC.”

MOST READ

HM King’s humanitarian initiatives lauded by Sudan’s foreign minister

Sudan’s Acting Foreign Minister Omar Qamar Al Din Ismail has praised the support of His Majesty the King to Sudan in various circumstances and...

Bahrain marks World Patient Safety Day

Bahrain joins the world in marking the World Patient Safety Day observed on September 17. This year's theme is “Health Worker Safety: A Priority...

Manage Your eVisa Requests Quickly and Easily on Bahrain.bh

Obtaining or renewing visas in the Kingdom of Bahrain is a relatively simple procedure. All you need to do is ensure that your documents...

Interior Minister: valid PCR certificates for entry to Bahrain via causeway

The Interior Minister General Shaikh Rashid bin Abdullah Al Khalifa said that Polymerase chain reaction (PCR) certificates accredited by the Saudi Health Ministry within 72...

Quick look at Nvidia’s new RTX 3080

Nvidia is promising big things with the GeForce RTX 3080 graphics card. “Twice the performance” of the RTX 2080 is perhaps the biggest claim...

HH Shaikh Nasser hails horse racing victories in UK, France

His Majesty King Hamad’s Representative for Humanitarian Work and Youth Affairs and Supreme Council for Youth and Sport (SCYS) Chairman, HH Shaikh Nasser bin...

stc Bahrain collaborates with INJAZ Bahrain to host a no. of virtual workshops

stc Bahrain, as a world-class digital enabler partnered with INJAZ Bahrain to host its Virtual Innovation Camp and Virtual Job Shadow workshops, in support...

RHF Secretary-General visits flood-affected areas in Sudan

Royal Humanitarian Foundation (RHF)'s Secretary-General Dr. Mustafa Al-Sayed, visited some areas affected by the floods and torrents that swept Sudan. This came under the directives...

Declaration Supporting Peace: A historic, brave step aimed to enhance regional security and stability

The declaration supporting peace signed by the Kingdom of Bahrain with the State of Israel is a historic move towards establishing peace in the...

Zain Bahrain introduces Zain Digital Natives Advancement Program for newly recruited Gen Z Bahraini employees

Zain Bahrain, a leading telecommunications operator in the Kingdom of Bahrain, fuelled by the passion to empower Bahraini youth with specific skills, recently announced...

Health Minister receives Indian ambassador

Health Minister Faeqa bint Saeed Al Saleh, received Indian Ambassador to Bahrain Piyush Srivastava. The minister praised the historical relations between Bahrain and India in...

stc Bahrain joins stc Group as the diamond sponsor of Virtual Capacity Middle East

stc Bahrain, a world-class digital enabler, joins stc group Kuwait and KSA as a Diamond sponsor of the virtual Capacity Middle East Conference 2020,...

Virtual meeting by Rotary Club of Salmaniya

The Rotary Club of Salmaniya held its regular virtual meeting on Wednesday 2nd September 2020. The club was privileged enough to have internationally renowned...

Southern Governor holds virtual Majlis

Southern Governor His Highness Shaikh Khalifa bin Ali bin Khalifa Al Khalifa met  through his virtual Majlis with a number of citizens from the...

iGA announces jump in usage of government app & eServices

Government digital transformation efforts are proceeding at breakneck speed, as reflected by the quarterly eServices statistics report, which recorded a 20 fold surge in...