Global leader in commercial real estate services and investments, CBRE Middle East, reports that Bahrain’s real estate transaction values have increased overall for the first half of the year, with mixed sectoral performances.
In Bahrain’s residential market, sales of villas climbed 7.8% on a square meter basis over 2023 rates, while sales of apartments stayed stable over the same time frame, continuing a trend of growth that began in 2021, according to CBRE’s most recent Bahrain Real Estate Market Review for the first half of 2024.
The real estate expert claims that local demand, primarily from citizens looking for reasonably priced units, drives Bahrain’s villa market, with international buyers making up the majority of the supply for mid-to-high-end apartments in foreign investment zones.
As of right now, CBRE estimates that the stock of freehold apartments available to foreign investors is roughly 19,356 units, plus an additional 1,361 units that are anticipated to hit the market by year’s end.
It is expected that in the absence of a significant uptick in demand, the downward pressure will result in stagnant apartment prices or more muted absorption rates, which will ultimately translate into lower sales rates.
Despite difficulties in the industry, CBRE stated that new openings are still occurring in the kingdom’s retail market. The average occupancy of the properties tracked by CBRE decreased by 2 percentage points to 68.9% after experiencing steady but sluggish occupancy growth since H1 2022.
Nonetheless, the inclusion of Marassi Galleria in the list of properties under survey is influenced by this decline in occupancy. Only Bahrain’s larger malls operated by regional operators had high occupancy rates.
Smaller properties that lack the demand drivers necessary to draw in foreign occupiers and foot traffic may be negatively impacted by the relative success of these malls. In-line units at prestigious, industry-leading shopping centers rent for an average of BD21.5 ($57 million) per square meter per month.
However, this rate does not apply to the entire market; average rates for in-line units are generally around BD11.5.
In Bahrain’s competitive retail market, even within the top malls, there is a trend toward a more creative tenant mix as operators offer more family-friendly entertainment options.
According to CBRE, rental rates in Bahrain’s office market are still dropping for both prime and non-prime properties. As a result of excess supply levels exceeding demand in the market, which has been going on for more than ten years, the average rental rates in H1 decreased by 2.9% from 2023.
According to the expert’s report, there is a continuous trend toward flights that prioritize quality and offer reasonable prices in the Prime and Grade A segments.
In Bahrain, the difference between Grade A and Grade B space is minuscule in comparison to other business centers in the area.
To attract the limited demand in this competitive market, landlords are compelled to offer incentives. The majority of the activity in this sector is driven by relocating established firms in Bahrain, with a small number of new market entrants vying for significant space.
In contrast to shell and core space, CBRE reported that there is still a higher demand for CAT-A or CAT-B space, which offers semi-fitted or turnkey solutions.
Regarding the kingdom’s hospitality industry, the real estate specialist reported that there has been a consistent increase in foreign arrivals, with visitation in 2023 surpassing pre-pandemic levels.
It said that inbound travel by land, air, and sea increased by 24.7% every year, with the majority of visitors coming from Saudi Arabia through the King Fahad Causeway.
The tourism growth has matched the improvement in hotel KPIs; from January to June of this year, average hotel occupancy has increased by 7%, or 3.6 percentage points, over the same period in 2023. Moreover, average RevPARs have increased by 9.8% and average ADRs by 2.6%.
Heather Longden, the Director (Advisory & Transactions) for CBRE in Bahrain, said: “While the number of recorded transactions declined in H1 2024 when compared with the same period in the previous year, the overall value increased, which suggests an increase on average in individual transaction values.”
“While the commercial office and retail market continue to face challenges in terms of take up, due to increasing supply and limited growth in demand, there are segments of the market and stand out developments providing competitive products that are managing to buck the trend,” noted Longden.
Samantha Schiffman, the Senior Analyst – Strategic Advisory in Bahrain, said: “Residential market performance has been mixed in H1, with villas sales rates increasing while apartment sales rates have remained stagnant, consistent with the significant existing and pipeline supply in the market.”
“Hospitality sector KPIs saw encouraging improvement across the board in the first half of the year, following a significant increase in tourist arrivals in 2023,” he added.
