Bahrain's retail sector revival six months away as Covid-19 bites

MANAMA: Bahrain’s retail sector is not likely to return to pre-pandemic levels until mid-2021, given the challenging economic landscape.

According to international real estate adviser Savills, retail footfall is expected to remain low in the near term adding to stress on occupancy rates in malls as some retailers fall victim to the pandemic.

A report released by the firm sees letting periods getting extended as the tenant pool reduces and landlords have to readjust rental rates as shopping behaviours alter.

Over the past year, Savills has noted considerable increases in vacancy rates in prime assets which have enjoyed extended periods of full occupancy such as City Centre Bahrain which now has a reduced occupancy.

It found retailers are putting expansion plans on hold largely due to the lack of demand and other associated costs. Also seen is downward pressure on retail rents across Bahrain as supply and demand reach a new level of imbalance.

While retailers have worked hard to adapt their business models, the loss of footfall has had an undeniable impact, notes the quarterly tracker of Bahrain’s property market.

Even as shops reopen their doors, it may take some time for consumer confidence to return to pre-Covid-19 levels.

The oversupply of retail in most cases mirrors an exponential rise in Internet retailing, said Savills.

While the increase in online shopping has not reached the level of market penetration as other mature markets, it is still having a large impact on the Bahrain retail market, the report found.

The adaptation is not only restricted to physical spaces but also the rental models being offered by landlords and developers.

Savills Bahrain associate director and head of professional services Hashim Kadhem said there may well be a shift towards more community and convenience-based retail.

“These concepts are currently proving popular with quick take up of spaces in the new developments of District 1 in Hamala and Janabiyah Square. Further increases in e-commerce and higher proportion of discretionary spend on leisure experiences will lead to a change in the way in which we use space,” he added.

Mr Kadhem feels landlords looking to adapt might consider converting retail into ‘experiential’ leisure or rebuilding it as an office or residential space.

Bucking the trend, industrial/warehousing assets have proved to be more resilient with an increased demand from tenants for high-quality warehouses.

Savills expects the industrial sector to benefit in the post-Covid-19 era from the exponential increase in demand for online retail services, making it a stable and secure investment asset class.

“The e-commerce sector has essentially been fast-tracked, with the grocery and non-discretionary sector proving strong,” explained Mr Kadhem.

A combination of shoppers wanting to shop online as well as supply chain risk, and suppliers wanting greater certainty and holdings of stock, have led to an increase in demand locally.

Overall, the firm anticipates a subdued real estate market in the kingdom over the coming twelve months.

Commenting on the current state of the Bahrain economy and property sector, Savills Northern Gulf Harry Goodson-Wickes said: “Over the past few years, Bahrain has adopted a series of positive reforms to diversify its economy and empower the private sector.”

He said the government launched the National Planning Development Strategy 2030 and established the Real Estate Regulatory Authority (RERA), in an integrated approach towards urban development and to increase transparency while promoting investments and protecting the rights of consumers.

“However, government revenues have not kept pace with the overall diversification strategy and in addition to that, the onset of Covid-19 has undone a lot of progress made under the Fiscal Balance Programme (FBP),” stated Mr Goodson-Wickes.

Source: http://www.gdnonline.com/Details/896712/Bahrains-retail-sector-revival-six-months-away-as-Covid-19-bites

 

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