Bahrain’s hospitality and residential markets record marginal uplifts in Q3 2023 while other sectors remain stagnant, says CBRE

Real estate transactions in Bahrain totalled 5,145 in Q3 2023, down marginally by 2.5% from a quarter earlier. When comparing the volume of transactions in the year to date however, we observe an increase of 5.1% in the first 9 months of 2023, compared with the same period in 2022.

Looking at Bahrain’s residential sector, quoted residential rates performance was mixed in Q3 2023. When compared to Q3 2022, all but quoted apartment sales, which fell by 1.7%, increased. Apartment rents increased by 3.2%, while villa rents and sales increased by 4.3% and 1.2% respectively. Looking at quarter-on-quarter change, rental rates fell marginally across both apartments and villas, while sales rates grew, compared to Q2 2023. In the mid-to-high-end segment, apartment rents fell by 2.5% quarter on quarter, while villa rents fell by 0.3%. In terms of sales, apartment and villa rates grew by 1.0% and 3.9% quarter-on-quarter respectively. In September, Eagle Hills completed construction of Marassi Park, a 249-unit, luxury residential development in Marassi Al Bahrain on Diyar Al Muharraq, ready for handover during Q4 2023. The property, which is the fifth project to be delivered in the development, has 25,500sqm GFA, sea views, and is within a short walk of both Marassi Beach and the yet-to-open Marassi Galleria shopping mall.

In the office sector, average rents have remained constant in the Grade A category overall in the year to Q3 2023, as supply growth is not being met with the required demand from local or international occupiers and vacancy rates remain relatively high. Taking a regional view, office rents in the UAE and Saudi Arabia have seen significant increases in the Grade A category, where in the year to Q3 2023 the average rental increase was recorded as 11.4% for all surveyed cities. Bahrain currently has some of the lowest office occupancy costs in the region. It is anticipated that with new stock coming on stream in 2024 and 2025, average rental rates and occupancy are likely to be impacted although we expect the flight to quality to continue. This is driven by office occupiers in lower grade space taking advantage of affordable commercial terms for Grade A space. We are continuing to witness development in the flexible office sub-segment in Bahrain, including the opening of a new co-working space during Q3 2023. HQ, located in Seef Mall, comprises 1,085sqm of varying workplace solutions, including hot desks, offices and event spaces, as well as Commercial Registration (CR) options, which is mandatory to set up a business in Bahrain.

Within the hospitality sector, key performance indicators demonstrated improvement. STR data year-on-year in the year to September 2023 shows that average hotel occupancy in Manama is up by 5.9% compared to the same period in 2022, with RevPARs also up 4.9% YoY. This is despite average daily rates (ADRs) falling slightly at 1.0%. In July, it was announced that Edamah broke ground on two boutique hotels at Bilaj Al Jazayer – the four-star Avani and five-star Tivoli, both scheduled to open in 2025. Upon completion, the Bilaj Al Jazayer mixed-use 1.3 million square metre development master plan will also comprise residential villas and apartments, retail and F&B, entertainment and offices along the 3km beachfront. Fraser Suites is expanding its offering in Bahrain, signing with Seef Properties to operate in Al Liwan in Hamala. The new offering will provide 63 serviced apartment units, with a mix of one-, two-, and three-bedroom apartments, over three floors. The serviced apartment component is expected to open in Q4 2023.

Bahrain’s retail market continues to witness development of new stock within both the destination mall and neighbourhood plaza categories. Marassi Mall is now due to open in February 2024, which will introduce approximately 116,000 square metres of GLA. The Avenues Phase 2, which will add circa 40,000 square metres, is also set to complete next year. During Q3 2023, a number of new announcements were made, including Edamah’s renovation of Reef Mall in Malkiya, the launch of TimeOut Market at Bahrain City Centre, due to open in 2024, and the news of Lulu Hypermarkets to be opened in a variety of locations, including the Avenues, Manama Centre, and Diyar Al Muharraq. While there are concerns over the significant pipeline supply and the impact on rental rates, take up of space in key new projects and growth in consumer spending provide a more optimistic view.

Heather Longden, Director – Advisory & Transactions, at CBRE in Bahrain comments: “We’ve seen slight uplifts in Bahrain’s hospitality and residential sectors in Q3 2023. In the residential market, although performance was mixed and quoted apartment sales rates dropped marginally year-on-on year, average quoted residential rents increased along with villa sales rates across the geographies. In the hospitality sector, occupancy rates increased by 5.9% compared to the same period in 2022 and RevPARs also grew by 4.9% in Manama. Other aspects of the market remained stable, as the commercial office and retail sectors continue to witness development with prominent projects due to complete soon, which will add to existing stock.”

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