Bahrain real estate market poised for a resurgence

MANAMA: Bahrain’s real estate market has outperformed many major investment destinations this year with the national pandemic response set to spur recovery across sectors, a new report says.

According to Julian Roche, the chief economist at property consultancy and chartered surveying firm Cavendish Maxwell, the kingdom’s real estate sector has the advantage of being driven by fundamentals which have shown improvement since early this year, and investors who have been committed for the long-term.

“If the expectations of economists worldwide are realised, and the real estate market continues to track the economy closely, a revival in market conditions in Bahrain is a plausible central forecasting scenario,” he said in the firm’s 2020 Bahrain Property Market Report.

Mr Roche adds that “an exemplary response to Covid-19, including stringent screening and testing procedures, effective management of international travel, and targeted fiscal measures have seen Bahrain manage the crisis as efficiently as its larger neighbours, and maintain both economic and political confidence.”

Similar to other global economies, Bahrain will witness a contraction in economic growth in 2020, with a rebound expected in 2021.

Despite the volatility in oil prices and ongoing fiscal consolidation, the kingdom has continued to develop infrastructure projects with BD221.7 million in new tenders in H1-2020.

Also, there continues to be no medium-term threat either to the currency peg or to the government’s hard-won political achievements, said Mr Roche.

Measures introduced by the Bahrain government to mitigate the impact of the pandemic, including a BD4.3 billion economic stimulus package, are expected to benefit various sectors, particularly SMEs and the private sector.

The report was compiled by Cavendish Maxwell’s in-house consulting and research team, and covers key data on the residential, retail, office, industrial and hospitality sectors.

In general, oversupply continues to govern residential property prices and rents in Bahrain.

Higher vacancy rates coupled with the completion of projects under construction are factors increasingly pressuring landlords to attract tenants, says the report.

The trend of subdued market conditions in the office sector has extended into 2020, primarily due to an oversupply of commercial spaces amidst a protracted economic slowdown.

However, certain pockets have displayed signs of recovery with rents either holding steady or declining at a slower pace.

Occupancy levels are improving, albeit slightly.

Data from STR Global showed that in Q3 2019 in Manama, hotel occupancy grew 3.8pc to 55.5pc, ADR rose 0.2pc to BD58.6 and RevPAR increased 4.1pc to BD32.5 compared to the year ago.

The absolute occupancy level was the highest for a third quarter in the capital since 2010.

Despite being oversupplied, a number of major retail projects have either been announced or delivered recently and total approximately 300,000sqm of combined gross leasable area.

These establishments have been designed keeping in mind the need to align with the rising popularity of e-commerce versus traditional retail.

As tourism continues to drive retail in Bahrain, the sector will naturally face headwinds whilst travel remains restricted due to Covid-19 and until normal activity resumes.

Authorities are preparing for a resurgence when safety is restored with a slew of digital campaigns to promote tourism post Covid-19.

A number of hotel launches and renovations have also been planned to accommodate visitors.

Commenting on the report, Aditi Gouri, head of strategic consulting and research at Cavendish Maxwell, said: “In what has been a challenging year, Bahrain has suffered a dual blow from weak oil prices and the restrictions brought on by the Covid-19 pandemic. However, the kingdom has been quick to respond and has done so efficiently, announcing relief measures to help individuals and businesses tide over the health crisis and continue on the path to recovery.

“Further, the successful hosting of events such as the Formula 1 Grand Prix recently is testament to the resilience of the island’s economy which has tourism and entertainment at the heart of its diversification strategy.”




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