Knight Frank says Bahrain's commercial office market continues to be dominated by weak occupier demand
Bahrain’s commercial office market continues to be dominated by weak occupier demand coupled with oversupply, a legacy of the 2001 to 2007 construction boom, according to new research.
Knight Frank's Bahrain Market Review 2019 said this supply-demand imbalance has endured since 2010 when the full effects of the global economic downturn hit Bahrain.
It added that over recent years Manama’s office market has become favoured towards tenants.
"As a result of the more tepid economic backdrop we have seen subdued demand, with rents across all market segments seeing significant declines. In 2018 we have witnessed rents remain relatively stable," the report noted.
On the back of reforms, easing of regulations, continued investment in large scale projects and higher oil prices, GDP growth is expected strengthen to 2.8 percent and employment is expected to expand by 2.5 percent in 2019, the report added.
Knight Frank also said that Bahrain’s hospitality sector may begin to see international visitation from outside the Gulf region increase as the country’s national airline, Gulf Air, expands its network alongside Bahrain International Airport’s expansion.
Bahrain has traditionally attracted regional GCC visitation, particularly from Saudi Arabia via the King Fahd Causeway, resulting in challenges in relation to driving occupancy rates.
Taimur Khan, research manager, Knight Frank, said: “Demand for commercial office space continues to be limited and largely centred on small, fitted out units as tenants look to avoid cap expenditure. This trend has been prevalent for the past seven years and looks set to remain in the short to medium term.
"Vacancy rates across the market continue to hover around the 40 percent mark with best in class schemes commanding better occupancy levels. Conversely, older buildings with inefficient floorplates and poor parking arrangements look set to suffer from lower occupancy levels and higher falls in rental rate.
"As a result of these market conditions and the lower cost of doing business in Bahrain when compared to other regional financial centres, the kingdom is well placed to take advantage of new entrants to the market that are seeking access to the GCC.”