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Bahrain Emerges

Bahrain Emerges

1 August, 2014

The Bahrain Government’s wide-ranging investment programme appears to be working, as confidence lifts, and investors and developers return to the market.

Bahrain’s national stability and improved economic conditions have proved the catalyst for change to kick-start the country’s real estate market once more.

The Kingdom of Bahrain, located just off the eastern coast of Saudi Arabia, has historically been a centre of business for oil and gas and financial industries. The island state’s recent political turbulence, inspired by the regional Arab Spring, put its economic future into turmoil. But as stability returns, so too are the investors, developers and end-use purchasers.

Bahrain’s growth is steady, but its future looks promising as, according to Cluttons Spring 2014 Residential Market Outlook report, both the residential sales and lettings markets are showing improvement.


Bahrain has seen a gradual resumption in development and buyer activity. Developers are now returning to the market as confidence returns among investors, with Saudi and Bahraini buyers amongst the most active groups.

“Residential sales are currently very heavily weighted towards the Bahrainis and Saudis,” admitted Catesby Langer-Paget, Associate Director and Head of Agency, Cluttons Bahrain.

“However, the Indian community here is huge and we are seeing some investors. We are also seeing more western expats, both from buying and selling perspectives, as some have held their assets for a while.”

According to Langer-Paget, Bahrain has always been active in promoting itself and this is now paying off. “The Bahrain Economic Development Board is trying to encourage more investment in Bahrain,” he explained. “We are also feeling the knock-on effect of the global economy improving. Dubai World Expo 2020 and World Cup Qatar 2022 are lifting the region and Bahrain is seeing the knock-on effect there. Things are certainly getting better now.”

One big indication that confidence has returned is the resumption of off-plan sales.

“Off-plan sales were impossible a year ago, but there’s quite a few off-plan projects coming up now and they are selling really well,” said Langer-Paget.

The new 405-unit Fontana Gardens scheme was launched in early February and off-plan prices currently stand at around BD 900 per sqm (US$ 2,380 per sqm). This compares to an average of BD 800 per sqm (US$ 2,120 per sqm) for units at the completed Fontana Towers, highlighting the rising confidence in the market.

According to Langer-Paget, the government is also planning to bring in new rules on Escrow accounts and special permits will be required to sell off-plan. This will only help buoy confidence in Bahrain.


In the lettings market, the increased stability and job creation is helping to drive both demand and rental value growth. Cluttons reports that average villa rents in areas such as Amwaj Islands have edged upwards to BD 1,450 (US$ 3,800) per month from BD 1,400 (US$ 3,700) per month.

The report also points to rising tenant interest in villas in Saar, with average rents rising by 2.5% in Q1 to BD 1,000 (US$ 2,650) per month, up 10.8% on the same period in 2013, making it the best performing villa submarket. Saar’s close proximity to schools and its strategic location on the coast make it an attractive option for families.

“We are mostly seeing existing companies expanding. At Cluttons we’ve seen an increase in the number of employees we have and many companies in Bahrain are following a similar path. Also, the U.S. Navy is expanding,” Langer-Paget pointed out.

The U.S. Navy may well be increasing personnel, but U.S. Federal Budget cuts mean that accommodation budgets remain on hold. The Cluttons report states that the demand for accommodation from the U.S. Navy is already gradually shifting away from higher end, higher budget properties to mid-range properties. Budgets for this cohort currently hover between BD 650 (US$ 1,720) and BD 900 (US$ 2,380) per month, for fully furnished properties.

Cluttons’ report also highlights the hydrocarbon sector as a notable generator of jobs and therefore tenants. As multiple sectors continue to expand, the lettings market is expected to benefit from a broadening tenant base.


Bahrain’s retail market has remained the best performing sector in the commercial market, with developers capitalising on the buoyant demand for retail schemes in Manama, according to Cluttons Bahrain’s Spring 2014 Commercial Market Outlook report.

The continued high inflow of Saudi tourist traffic over the King Fahd Causeway is a key driver in this growth.

Bahrain has been dominated by big mall projects such as City Centre, which opened in Manama in 2008 bringing 150,000 sqm of gross leasable area (GLA). The mall currently includes 350 retail outlets, including the first Carrefour Hypermarket in Bahrain.

However, according to Langer-Paget, retail development is changing tact. “People are now thinking of neighbourhood retail strips and smaller local malls and there seems to be a huge amount of demand for retail now,” he explained.

Later this year, Seef Mall Muharraq will open, bringing 30,000 sqm GLA, a Geant Hypermarket and 14-screen cinema to Bahrain. The US$50 million project is already fully leased.

Another new retail entry will be the Dragon City project, under development at Diyar Al Muharraq, a 10 sq km urban waterfront development, currently under construction in northern Bahrain. As the Bahrain Government moves to foster stronger trade links with China, the new shopping mall intends to target Chinese retailers, while Bahraini and Saudi retailers are also expected to have a strong presence. Cluttons expects to commence leasing of units shortly, with rents projected to range from BD 20 (US$ 53) to BD 25 (US$ 66) per sqm. “Diyar sees this as an enabler to kick-start the whole project,” explained Langer-Paget.

The Kuwait Finance House is funding Diyar Al Muharraq. According to Langer-Paget, local and regional banks, funds or HNWIs, are funding most projects in Bahrain.

“It is easy for anyone in the GCC to invest in Bahrain,” he added. “We have a lot of money coming from Kuwait. People are seeing a turning point in the Bahrain market and it will start attracting more interest from international investors.”


Residential and retail confidence has been quick to return, but Bahrain’s commercial market remains somewhat stagnant, despite its large-scale developments such as Bahrain Financial Harbour.

According to Cluttons, the Bahrain Financial Harbour and the 27-storey Millennium Tower are both still striving to achieve high occupancy levels. Cluttons anticipates a further downward adjustment in rents in such schemes as landlords work to lure occupiers away from older buildings elsewhere in the Kingdom.

Companies are beginning to capitalise on weak rents and relocate to what is perceived to be higher quality space. Occupier requirements stand around the 100 sqm to 200-sqm mark; this compares to less than 100 sqm at this time last year, signalling the slow but steady upturn in occupier confidence. Still, over 90% of current occupier activity is being driven by those relocating within Bahrain, while the remaining requirements stem from those new to the kingdom, according to the Cluttons report.

Cluttons also points to the government’s heavy investment in new energy and transportation infrastructure, which is lifting occupier activity from this group. The hydrocarbon sector is also driving office space requirements.

Bahrain, with its close ties to Saudi Arabia and the rest of the GCC, presents a valuable proposition. As further development and infrastructure, such as the new Bahrain-Qatar Causeway, take shape, real estate in the Kingdom could really take off.