Oversupply dampens Bahrain's office market in H1

Knight Frank says commercial property rents are currently around 40% below their 2008 peak

Commercial property rents in Bahrain continued to flatline in the first six months of 2014 as the market suffered from an oversupply of office stock, Knight Frank has said.

The real estate consultancy said Bahrain's office market has been suffering from an oversupply and weak occupier demand since the 2008/09 crisis, leading to developers scaling back office construction activity, with little new floorspace in turn being delivered to market.

That combined with stabilising market sentiment has resulted in rental values more or less flattening over the past six months, Knight Frank said in a report.

It said that despite office rents showing signs of finding a floor, at BD9 per sq m per month, prime rents are currently around 40 percent below their 2008 peak.

Knight Frank added that Grade A and B have seen similarly large falls so oversupply and lower corporate profits have hit all segments fairly similarly.

Over the next 12 months, with development activity expected to remain depressed, Knight Franks said it expects the downward pressure on rents to abate.

The report said in the first half of 2014, occupier demand was limited to small pockets of Bahrain's office market. Small, fitted-out units remained most popular, especially among those tenants looking to avoid the upfront costs of carrying out the work themselves.

"Occupiers are also showing a greater preference for shorter leases in order to give them the flexibility to relocate in case of changes in circumstances," the report added.

In addition, Knight Frank said the office market is currently experiencing "churn", with hardly any new corporate tenants entering the market.

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