Real estate market ‘becoming more tenant-led’
MANAMA: Bahrain is becoming an increasingly tenant-led residential real estate market as market adjusts to higher supply levels, according to real estate industry expert CBRE.
In its latest report on trends driving the kingdom’s real estate sectors, the consultancy found that landlords in the country are expected to continue to offer lower rents to be competitive with tenants having greater bargaining power and flexibility.
Incentives seen more and more frequently include, rental discounts and rent free introductory offers. 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.
On the office space in the kingdom, it says 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 report says physical offices are here to stay; with portfolio optimisation and a well-managed remote working strategy.
CBRE 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.
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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.
Rapid growth of online shopping is resulting in more omnichannel retail; however, preserving the ‘physical experience’ will be a critical component of these omnichannel strategies, particularly in Bahrain and the rest of the Middle East.
A major contributor to the country’s GDP is the hospitality sector, where CBRE sees occupancy levels improving as Covid-19 restrictions ease and business and leisure travel increases.
Hotels have been significantly impacted by restrictions, both in terms of use of facilities and travel due to the pandemic, particularly the limited movement across the King Fahad Causeway. Domestic tourism, the ‘staycation’ trend and quarantine facilities have underpinned occupancy levels.
Pre-Covid pressures on the hospitality sector are likely to continue and this presents an opportunity to reposition the kingdom’s tourism offering, with a more cohesive strategy that connects destinations, attractions and accommodation.
However, niche opportunities exist for developers to meets demands for more affordable and quality, three- and four-star properties that provide family friendly accommodation, taking advantage of the kingdom’s underutilised coastline.
Many government initiatives to enhance beachfronts that provide services and attractions are underway.
Another key segment of real estate is industrial and logistics where the accelerated e-commerce adaptation in Bahrain is expected to continue to drive demand for warehousing. Demand is set to increase for such space within and outside of formal industrial and logistics parks, to enable servicing of the local market.
Diversification away from underperforming traditional asset types is likely to drive investor activity towards the industrial and logistics sector. There are still a limited number investment grade properties available presently for occupiers requiring pre-built accommodation.
The majority of demand is expected to be driven by the leasing of international grade logistics warehouses. Secondary grade assets will remain under pressure without capital investment through refurbishment and redevelopment as local and international occupiers demand more sophisticated offerings suited to their needs.
avinash@gdn.com.bh
Source: https://www.gdnonline.com/Details/978572
