Bahrain landlords are slashing rents, offering lease-free periods and three-month contracts on commercial property in a bid to beat the recent lull caused by the country’s social unrest, real estate experts have said.
Pressure on rental rates seen in the first quarter of the year has continued into the second, reports have said, as the market struggles to make a comeback and battles with oversupply.
In its half-year report on GCC real estate, Global Investment House said the average office occupancy rate ranges from between 60 and 70 per cent, with about 300,000 square meters of built stock still vacant and 200,000 square meters of leasable space still to come online.
Last month, property consultants Knight Frank said prime rates dropped by 11 percent in the first half of the year, reaching a monthly rate of BD9 per square meter - back to where the market was five years ago.
Analysts say landlords are offering deals and discounts in the hope of retaining and attracting new tenants.
“The commercial sector was hit hard by the unrest, people are no longer coming here,” the director of KBH Properties in the Arab state, Mushir Lathif, told Arabian Business.
“Rents in Bahrain Financial Harbour used to be between BD18 and BD22 per square meter but now they are going for BD10 or BD11.”
He added how in Manama Gate, near the National Bank of Bahrain tower, tenants can now rent for BD5-6 per square metre, where previously they cost around BD10-15.
“If you really bargain they could give you the first month free. Also previously landlords only offered a 12-month fixed contract but now you can get three or six-month contracts. They don’t want to lose you.”
Bahrain’s property sector was hit hard by the economic crisis in 2008, which saw rents fall by a massive 30 percent in the year 2009-2010.
The social unrest which gripped the Arab state at the start of 2011 and led to violence on the streets has since halted any signs of recovery, as many firms have moved their operations to more secure states like Dubai and Abu Dhabi.
In March, the Bahrain government ordered a nationwide crackdown on pro-reform demonstrations, targeting protesters who took to the streets.
Earlier this year, analysts warned that the country, which is home to one of the oldest financial centres in the region, could have lost its edge as a financial hub as a result of the instability.
“Bahrain probably has lost out in the competition, or has lost its status as a financial centre to Dubai,” Brad Bourland, chief economist at Jadwa Investment told Arabian Business in April.
“Many [businesses] have already left and moved down here [to Dubai] and I doubt that it will be reversed and that they would move back.”
Among the worst hit buildings are those that are poorly managed or maintained, property consultants say.
To combat the lull, landlords are also working hard to improve the attractiveness of their stock.
“The two main things that a landlord can do to encourage tenants are to reduce the rent and fit-out the space,” said Harry Goodson Wickes, a Bahrain property analyst at Cluttons.
“Traditionally new office space was offered in core and shell condition but many are now willing to include at least a basic fit-out. Other things that can be done include offering rent free periods [and] increasing your car parking ratio.”