PROPERTY MARKET REPORT
About Established in 2008, Cavendish Maxwell is one of the largest and most respected property consultancies in the region. An influential partner and trusted advisor to key stakeholders in real estate markets throughout the Middle East and Africa, we offer a comprehensive range of exceptional property services across a diverse mix of sectors and asset classes. Cavendish Maxwell is a certified member firm of the Royal Institution of Chartered Surveyors (RICS), bringing together a world-class team of handpicked property consultants and surveyors, unmatched elsewhere in the region. Our team of highly qualified professionals is trusted by real estate market stakeholders throughout the region, including international and domestic banks, property developers, governments, owners and investors, asset managers and professional services firms. We service a diverse mix of specialist property sectors including, residential, retail, offices, hospitality, healthcare, education, industrial and logistics. Cavendish Maxwell also publishes independent reports, prepared to globally accepted standards, for loan security, bank lending, audit, insurance reinstatement, dispute resolution, risk management, debt recovery, performance analysis, purchase and sale advice, and third-party reliance purposes.
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2020 BAHRAIN PROPERTY MARKET REPORT
Foreword The trajectory of 2020 has been unlike any other, quickly going from business-asusual to social distancing measures and restrictions in a bid to contain the spread of a highly contagious virus. At the same time, the focus on diversification is greater than ever, with hydrocarbon prices once again volatile amid increased supply and worries of weak global demand. At this crucial time, support from authorities has been extended to help businesses across sectors survive and minimise monetary and manpower loss. As the situation continues to evolve, the impact on various sections of the economy, including real estate, is yet to be fully ascertained. Against this backdrop, in our latest report we take a look at the performance of Bahrain’s real estate market with a focus on the measures introduced to mitigate the economic impact of the COVID-19 contagion. The analysis provides a comprehensive overview of the residential, commercial, retail, hospitality and industrial sectors with the aim to be a valuable tool in our clients’ decision-making process.
Contents 04
Macroeconomic Overview
18
Residential Market Overview
06
Measures To Mitigate The Economic Impact Of COVID-19
20
Office Market Overview
08 04
Foreign Direct Investment Overview
21
Tourism Overview
09 04
Demographic Overview
22
Hospitality Market Overview
10
Labour Market In Bahrain
24
Retail Market Overview
12
Bahrain Economic Vision And Sustainable Development Goals 2030
27
Industrial Market Overview
14
Infrastructure Projects
28
A Word From Our Chief Economist
3
Macro Economic Overview When oil prices collapsed in 2014, energy-dependent Bahrain’s fiscal deficit ballooned and debt levels rapidly increased. With the help of the Fiscal Balance Programme (FBP) and an external credit line to the tune of BHD 3.77 billion extended by neighbours Saudi Arabia, Kuwait and the UAE, Bahrain has been able to lower its borrowing costs. In addition, Bahrain has undertaken several reforms and diversification efforts to return to fiscal stability by 2022. These include implementing Value Added Tax (VAT) at 5%, providing a voluntary retirement plan for government workers, curbing public expenditure and ramping up non-oil revenues. The Electricity and Water Authority (EWA) began gradually lifting the electricity subsidy since 2019 and is planning to completely remove it by 2023 whilst ramping up the use of clean energy. Whilst efforts continue to eliminate the fiscal deficit, including plans to approach global capital markets to help fund fiscal reforms, the COVID-19 pandemic is expected to put a spanner in the works, at least temporarily. According to the International Monetary Fund (IMF), Bahrain’s fiscal deficit is expected to increase to 15.7% of gross domestic product (GDP) in 2020 from 10.6% in 2019.
GROSS DOMESTIC PRODUCT According to data from the Information and eGovernment Authority, between 2010 and 2019, Bahrain’s GDP increased from BHD 9.7 billion to BHD 14.5 billion at current prices, registering a compound annual growth rate (CAGR) of 4.6%. At constant prices, GDP grew from BHD 9.7 billion to BHD 12.9 billion with a CAGR of 3.2%. Compared to 2018, GDP in 2019 increased 2.4% at current prices and 1.8% at constant prices. Mining, financial services and manufacturing were the top three contributors to GDP growth in 2019. The oil sector grew by 2.2% at constant prices but shrank 3.9% at current prices. Reflecting the heightened efforts to achieve diversification from oil revenues, the non-oil sector expanded by 17.5% and 32.9% at constant and current prices, respectively. Whilst the oil price decline of 2020 has impacted major producers and exporters in the Gulf Cooperation Council (GCC) and the wider region, Bahrain has a smaller contribution to production and is not a core Organisation of Petroleum Exporting Countries (OPEC) member. This is likely to slightly mitigate the impact of weak crude oil prices on GDP growth. Similar to other global economies, Bahrain will witness a contraction in economic growth in 2020, with a rebound expected in 2021. The International Monetary Fund estimates Bahrain’s economy to shrink 3.6% during the current year and expand 3% in 2021, subject to the global economic recovery post the pandemic. Mitigation measures introduced by the Bahrain government, including a BHD 4.3 billion economic stimulus package, are expected to benefit various sectors, particularly small and medium enterprises (SMEs) and the private sector.
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2020 BAHRAIN PROPERTY MARKET REPORT
TOTAL GDP 2010 – Q2 2019
16 14.5
14.2
14
13.3 12.5
12.2
12
11.5
GDP (BHD Billion)
10.8
10
9.7
9.7
11.3 10.2
12.4
12.1 12.0
11.6 11.6
12.7
12.9
10.8
9.9
8 6 4 2 0 2010
2011
2012
2013
2014
GDP at Current Prices
2016
2015
2017
2018
2019*
GDP at Constant Prices
Source: Information and eGovernment Authority
GDP PER CAPITA 2019
GDP BY SECTOR AT CONSTANT PRICES 2019
In 2019, Bahrain’s GDP per capita stood at BHD 8,865, down 2% from 2018 when it was BHD 9,050. 17.8%
37.4%
16.5% 3.8%
7.3%
Mining Financial Services Manufacturing
14.5%
Construction Real Estate Others
Source: Information and eGovernment Authority
GDP Per Capita (BHD)
20,000 16,258
15,000 12,082 8,865
10,000
8,728 5,837
5,000 0
UAE
تةنمكحخحِآلKUWAIT BAHRAIN
KSA
OMANتةنمكحخحِآل
Source: World Bank
5
Measures To Mitigate The Economic Impact Of COVID-19 The government guaranteed full salary support for Bahraini private sector employees between April and June 2020 and 50% salary support between July and September. Automatic payment of businesses’ Electricity and Water Authority utility bills was covered between April and July up to the amount incurred during the same period in 2019. Likewise, individuals and families were given the same coverage up to their 2019 spend, however, support has carried on through the year. Meanwhile, the government has restructured administrative budgets to offset the cost of these stimulus measures. Exempting all individuals and businesses from municipal fees for three months from April 2020. Exempting all businesses from government-owned industrial land rental fees for three months from April 2020. Exempting all tourism-related industry from tourism levies for three months from April 2020. Terminating monthly work fees and fees for issuing and renewing work permits for three months from April 2020. Doubling the Liquidity Support Fund to nearly BHD 200 million. Increasing the Central Bank of Bahrain’s loan facilities to BHD 3.7 billion to allow debt instalments to be deferred and extra credit to be extended. The redirection of all Tamkeen programmes (semi-autonomous government agency that provides loans and assistance to businesses) to support adversely affected companies, as well as the restructuring of all debts issued by Tamkeen.
COVID-19 FACTS ACTIVE CASES
2,305
Data as of 12 December 2020
Source: Bahrain Economic Development Board
6
RECOVERIES
87,025
DEATHS
348
2020 BAHRAIN PROPERTY MARKET REPORT
7
Foreign Direct Investment Overview Between 2014 and 2019, foreign direct investment into Bahrain increased from BHD 9,680 million to BHD 10,900 million, registering a CAGR of 2.4%. The main source countries for FDI in Bahrain in 2019 were Kuwait, UAE, Ireland and Saudi Arabia. Bahrain has undertaken several efforts to attract foreign investment inflows. The country boasts the lowest corporate and personal taxes among Gulf nations, has no restrictions in free trade zones, and permits ownership by foreign businesses in over 95% of economic activities. FDI in Bahrain is poised for further growth as the country undertakes additional efforts to attract international investor interest. In 2019, Bahrain halved the amount required by expatriates to invest in the country to be eligible for self-sponsorship residential visas. Foreigners with a minimum BHD 50,000 stake in any financial, trade, industrial, tourism project or any other business or investment schemes can apply for the residence visas. Helped by the reforms and policies implemented, Bahrain’s performance on the World Bank’s Doing Business 2020 study also improved from the previous edition. The country moved up 19 places to secure the 43 rd spot among 190 countries.
BAHRAIN’S RANKING AGAINST 190 COUNTRIES OVERALL RANK: 43 1 17
17 67
51
72
77
94
Dealing with Starting a Getting business construction permits electricity
Registering property
Getting credit
Protecting minority investors
Paying taxes
Trading across borders
59
60
Enforcing contracts
Resolving insolvency
Source: World Bank
FDI INFLOW 2018–2019
FDI Inflow (BHD Million)
11,000 10,000
9,680
9,705
9,796
FDI INFLOW BY SECTOR, 2019 10,333
10,902
10,900
9,000 8,000 17%
7,000
83%
6,000 5,000 4,000 2,000 1,000 0 2014
2015
2016
2017
Source: Information and eGovernment Authority
8
2018
2019
Financial Sector
Non-Financial Sector
Source: Information and eGovernment Authority
2020 BAHRAIN PROPERTY MARKET REPORT
Demographic Overview According to the Bahrain Open Data Portal, Bahrain’s population increased 3% between 2007 and 2019, reaching over 1.48 million. During this period, male population registered a CAGR of 3.2% while the female population grew at a CAGR of 2.7%. Bahraini nationals comprised 47% of the total population whilst expats constituted the remaining 52%.
1,483,756
1,503,091
1,501,116
1,423,726
1,370,322
1,314,562
1,253,191
1,208,964
1,195,020
1,228,543
1,039,297
1,103,496
1,178,415
BAHRAIN POPULATION 2007–2019
1,600,000
563,192
556,227
535,337
523,957
508,075
464,810
448,515
453,537
446,418
426,906
407,223
800,000 600,000
731,997
764,357
741.483
760,449
788,381
806,487
846.365
888,389
951,312
946,864
920,564
200,000
676,590
400,000 632,074
Population
1,000,000
464,186
1,200,000
549,804
1,400,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Information and eGovernment Authority
Female
Male
POPULATION BY GOVERNORATE 2019 600,000
539,212
500,000 369,954
400,000 300,000
306,244
268,346
200,000 100,000 0
Capital
Muharraq
Northern
Southern
Source: Information and eGovernment Authority
9
Labour Market In Bahrain At the end of Q2 2019, the working population in Bahrain stood at 748,047 people. Expats accounted for nearly 80% of the workforce at 594,944 and Bahraini locals comprised the remaining share at 153,103. Compared to Q2 2018, the number of Bahraini employees decreased 3.6% as the second phase of the voluntary retirement scheme took effect during Q2 2019. According to the Labour Market Regulatory Authority (LMRA), the median monthly wage for Bahrainis was BHD 532 in Q2 2019. Compared to the same quarter a year ago, the wage declined 1.1% from BHD 538. In the private sector, the median wage for Bahrainis was BHD 431 in Q2 2019, up 3.6% from the year-ago period, whilst in the public sector, the median wage was BHD 696 declining 1.7% from the year-ago period.
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2020 BAHRAIN PROPERTY MARKET REPORT
TOTAL EMPLOYMENT
748,047
762,393
763,112
787,190
725,113
687,147
666,629
635,717
598,226
599,348
598,491
900,000
575,798
CAGR 2.4%
800,000 111,002
Employed Population
700,000
98,905
90,591
86,349
111,002 103,728
600,000
107,711
95,297 79,212
84,002
87,420
448,849
463,989
459,323
454,990
479,273
496,090
512,076
546,572
611,229
599,714
608,220
605,518
54,408
55,290
56,023
55,816
61,147
66,811
67,360
67,539
64,959
64,493
63,582
56,180
72,541
500,000 400,000 300,000 200,000 100,000 0
2008
2009
2010
2011
2012
Public Sector Employment
2013
2014
2015
Private Sector Employment
2016
2017
2018
Q2 2019
Domestic Workers
Source: Labour Market Regulatory Authority
TOP EXPAT DESTINATION BY RANK, 2019
7
32
No.
No.
Bahrain
No.
Oman
40
No.
UAE
64
Kuwait
Source: InterNations
11
Bahrain Economic Vision And Sustainable Development Goals 2030 Bahrain has aligned the Sustainable Development Goals (SDGs) of United Nations Member States with its national development agenda. Bahrain’s Economic Vision 2030 is based on the guiding principles of sustainability, competitiveness, and fairness. Interdependent on one another for success, the 17 SDGs together aim to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030.
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2020 BAHRAIN PROPERTY MARKET REPORT
With a decade remaining to achieve the objectives, Bahrain has already recorded success on several parameters: 0% - Population living in extreme poverty. 37.4% - Average economic growth in the past decade. +35% - Public expenditure in the budget on health, education, and social protection. 100% and 84% - Net enrolment ratio for primary and secondary levels, respectively. Basic education is free and compulsory, thus eliminating illiteracy. Maternal mortality rate at 28.6 deaths per 100,000 live births versus 226 deaths globally. Mortality rate of children under five at 9 deaths per 1,000 live births versus 44 deaths worldwide. 55% - Supervisory positions held by women, with 53% participation in the public sector and 33% in the private sector. 4% - Total unemployment with the private sector contributing to lower the rate and provide equal high paying employment opportunities. 65% - Population benefited from public housing services. 5 - New sustainable cities being developed. 100% - Coverage reached of safe water, sanitation and clean energy networks. 45,000 enterprises and 125,000 individuals – Beneficiaries of financial and training support of The Labor Fund (Tamkeen). June 2019 – Bahrain announces a ban on plastic bags to be implemented in phases. 13
Infrastructure Projects Bahrain continues to deliver on its infrastructure plans, with the benefits not limited to the construction sector but spilling over to the larger economy. The Aluminium Bahrain’s (Alba) Line Six expansion project, which makes it the largest aluminium smelter in the world outside China, and the Bahrain Petroleum Company (BAPCO) Modernisation Programme are some of the major infrastructure developments undertaken across Bahrain. Despite the volatility in oil prices and ongoing fiscal consolidation, Bahrain has continued to develop infrastructure projects with BHD 221.7 million in new tenders in H1 2020, according to data from the Bahrain Tenders Board. These investments underscore the government’s commitment to their extensive pipeline of infrastructure projects.
The government has approved a number of major projects including:
Airport expansion project valued at BHD 415 million.
Expansion and upgrade at Bahrain Petroleum Company’s Sitra oil refinery valued at BHD 2.3 billion.
Al Dur 2 Independent Water and Power Project (Phase II).
Sheikh Zayed Highway extension project valued at BHD 23 million.
Rail line development part of the 2,200 km GCC railway project.
Infrastructure work at five new housing towns—Salman City, Khalifa City, East Hidd Town, East Sitra Town and Al Ramli District—valued at BHD 245 million.
Construction of the Bahrain International Exhibition and Convention Centre in Sakhir spanning 308,000 sq m.
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2020 BAHRAIN PROPERTY MARKET REPORT
15
Upcoming infrastructure projects
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2020 BAHRAIN PROPERTY MARKET REPORT
Liquified Natural Gas Terminal 2016 to 2020 The facility includes an off-shore gas receiving, storage and regasification plant. The liquified natural gas terminal will provide energy for the industrial and manufacturing zones to meet energy needs on demand. The terminal will support the Hidd Industrial Area of the Salman Industrial City with the energy it needs to support growth, a boon to the wider economy.
New Passenger Terminal, Bahrain International Airport 2020 – (Possibly delayed) The expansion work of the existing terminal includes: 4,600 sq m departures hall. Two premium class check-in halls and 108 check-in desks. 24 passport control booths. 28 lanes. 9,000 sq m duty-free retail, food and beverage (F&B) zone. Airline premium class lounges. 24 jetty-served departure gates. Additional health facilities to check for COVID-19 cases.
Bahrain Petroleum Company (BAPCO) Refinery Modernisation 2022 Upgrade to enable total refinery throughput to increase to a maximum of 380,000 barrels per day (bpd). Refinery’s capacity to increase 42% from the existing 267,000 bpd.
Al Fateh Highway upgrade 2022 Estimated budget is over BHD 32 million. Widening of Al Fateh Highway to five-lanes, three footbridges, two utility tunnels, two-lane bridge at Sheikh Daij junction from Al Fateh Highway to Prince Al Saud Al Faisal Highway, etc. Project funded by Saudi Fund for Development.
King Hamad Causeway (Dammam - Bahrain Causeway) 2025 Bridge connecting Bahrain and Saudi Arabia to stretch over 25 km. Causeway expected to include two lanes for trains and one lane for cars.
North Manama Causeway Phase 2 and Busaiteen Link 2026 Construction of 21 km of roads, 11 junctions, and a new signature bridge. Part of the Bahraini ministry’s strategy to develop road infrastructure by constructing corridors to develop mobility and accessibility.
The Bahrain Metro Project (BIS63) 2030 Part of the kingdom’s Public Transport Masterplan 2030. Network spanning 184 km to be made up of six lines. Phase One to have two lines running 30 km and covering 20 stations. Red Line to link Bahrain International Airport with the suburban Seef District covering nine stations. Blue Line to start from Juffair suburb and end at Isa Town covering 11 stations. 17
Residential Market Overview In general, oversupply continues to govern residential property prices and rents in Bahrain. Higher vacancy rates coupled with completion of projects under construction are factors increasingly pressuring landlords to attract tenants. Recently completed projects include Eagle Hills’ Diyar Marassi Shores Residences project in Diyar Al Muharraq. The 11-storey development offers high-end apartments ranging from studios to five-bedroom units. In recent years, demand for affordable housing units for low- to medium-income families has significantly increased. As of March 2019, approximately 55,000 Bahraini families were on the government’s waitlist for subsidised housing. Under its Economic Vision 2030 programme and the Sustainable Development Goals mandate, the government is progressing towards reducing the waiting list for Bahraini beneficiaries. According to the government action plan 2015-2018, 40,000 housing units were to be built in various towns and villages across the kingdom. Under the following government action plan 2019-2022, the private sector committed to the construction of 25,000 housing units. These housing developments are located in areas such as East Hidd City, Diyar Al Muharraq, Salam City (previously known as Northern City), Al-Luzi area, Wahat Al-Muharraq and Tubli Garden. In addition, the Mazaya Programme has provided benefits to more than 5,000 Bahraini citizens to date with sharia-compliant financing with minimum down payments as low as 10%. Bahrain has recently introduced enhanced processes and policy reforms to promote real estate sector activity. Benayat, a new streamlined platform, has reduced the time taken to obtain a construction permit to five days versus several months taken in the past. Bahrain has also adopted international real estate standards with the launch of the Bahrain Valuation Standards (BVS) aimed at higher protection for investors and banks, and greater transparency and accuracy in the overall market. Confidence in the sector is evidenced in the growth in mortgage activity — banks in Bahrain issued mortgage loans worth BHD 1.89 billion for the period January–October 2019 compared with BHD 1.8 billion in all of 2018.
New RERA laws
Developers selling off-plan property are required to obtain a “Developer’s Licence” prior to implementing any development activities. On obtaining the license, details will be recorded in a ‘Developer’s Register’ which will be stored by RERA include information such as development plans, specifications, approved architectural and structural engineering plans, details of escrow account, financial guarantees, building permit, valuation of the development, title deeds, development plan and milestones (phasing schedule, completion date, etc.).
Going forward, individuals will not be able to practice both valuation and brokerage activities at the same time, but companies can continue to do so with the appropriate licenses.
Other laws have been amended and added in areas that include joint ownership, Home Owners Associations, and Registration of Rights, with non-compliance attracting various penalties and fines.
New valuation system In October 2019, RERA launched a new valuation standard, Bahrain Valuation Standards (BVS) in collaboration with the IVSC (International Valuation Standards Council) and RICS (Royal Institute of Chartered Surveyors). The new system complies with International Valuation Standards (IVS) and will enable enhanced market transparency and efficiency, protecting investors and the banking sector.
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2020 BAHRAIN PROPERTY MARKET REPORT
Diyar Al Muharraq Master Plan Seven man-made islands on the northern shores of Muharraq with residential, commercial and retail spaces.
UPCOMING PROJECTS
Bahrain Bay Master Plan Three islands with residential, commercial and retail spaces. Harbour Heights and Harbour Row Three luxury high-rise buildings and adjacent midrise mixed-use waterfront buildings in the heart of Bahrain Financial Harbour. East Hidd Housing Development Residential units and plots.
SALES PRICE
MONTHLY RENT
SALES PRICE
MONTHLY RENT
BHD 700 – 1,000 per sq m Studio – 3BR
BHD 230 – 1,350 Studio – 3BR
BHD 46,000 – 250,000 per sq m Studio – 3BR
BHD 280 – 1,400 Studio – 3BR
SALES PRICE
MONTHLY RENT
BHD 100,000 – 150,000 per sq m Affordable Villas SALES PRICE
MONTHLY RENT
SALES PRICE
BHD 500 – 750 per sq m Studio – 3BR
BHD 250 – 1,200 1BD – 3BR
BHD 250,000 – 500,000 per sq m Luxury Villas
BHD 500 – 800 Affordable Villas MONTHLY RENT N/A – Construction Luxury Villas
Diyar Al Muharraq Amwaj Islands SALES PRICE BHD 730 – 1,000 per sq m 1BD – 3BR
MONTHLY RENT BHD 450 – 1,650 1BD – 3BR
Seef Reef Island Saar
Al Juffair
Janabiya SALES PRICE SALES PRICE
MONTHLY RENT
BHD 120,000 – 450,000 per sq m 3BR – 6BR
BHD 450 – 1,700 3BR – 6BR
Source: Cavendish Maxwell
BHD 500 – 800 per sq m Studio – 3BR
MONTHLY RENT BHD 250 – 1,200 Studio – 3BR
SALES PRICE
MONTHLY RENT
BHD 130,000 – 650,000 per sq m 3BR – 6BR
BHD 600 – 2,500 3BR – 6BR
SALES PRICE
MONTHLY RENT
BHD 28,750 – 157,000 per sq m Studio – 3BR
BHD 250 – 1,350 Studio – 3BR
Apartment
Villa 19
Office Market Overview The trend of subdued market conditions in the sector has extended into 2020, primarily due to an oversupply of commercial spaces amidst a protracted economic slowdown. However, certain pockets have displayed signs of recovery with rents either holding steady or declining at a slower pace. Occupancy levels are improving but slightly, with landlords still vying for tenants. Demand has been robust for small and medium size spaces given the proliferation of start-up companies in Bahrain who seek smaller and flexible office spaces. As of Q3 2019, Bahrain had 119 start-ups, recording growth of 46% over the past three years. High demand is witnessed for smaller fitted offices in the range of 100-150 sq m. Unfavourable car park ratio to office spaces continues to be a challenge with many office schemes. However, developers are addressing these concerns in new schemes. Whilst the main business districts are Seef, Bahrain Financial Harbour (BFH), Bahrain World Trade Center (BWTC) and Bahrain Bay, BWTC continues to be the prime office address attracting tenants who seek prestigious and landmark establishments to be their office addresses. However, in case of the Diplomatic Area which was the former central business district, tenants prefer relocating to Seef due to favourable pricing, better quality space and ample parking. Among the high-end Grade A office spaces is the upcoming mixed-use 27-storey tower by FEB Aqar, a wholly owned subsidiary of First Energy Bank. Located at Bahrain Financial Harbour, the tower will house offices, freehold residences and space for a large retail unit. Similar to other markets, the pandemic will likely alter growth and expansion plans of companies in and outside Bahrain as they await certainty to emerge before making long-term property lease commitments.
MONTHLY OFFICE RENTS IN BAHRAIN
Seef District BHD 5.5 – 7 per sq m
Bahrain Bay BHD 5.5 – 7 per sq m
Diplomatic Area BHD 4 – 6 per sq m
Source: Cavendish Maxwell
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2020 BAHRAIN PROPERTY MARKET REPORT
Tourism Overview Manama was named ‘Capital of Arab Tourism’ for 2020 in recognition of the country’s historical and tourism offerings. In 2019, Bahrain recorded 12.5 million international arrivals. Between 2016 and 2019, the total number of international arrivals registered a CAGR of 0.5%, however, recorded a decline of 8% between 2018 and 2019. Bahrain recorded 11.1 million inbound tourists in 2019. Between 2016 and 2019 the total number of inbound tourists registered a CAGR of 2.9% but declined 8.2% between 2018 and 2019. For the first quarter of 2020, data from Bahrain Tourism and Exhibitions Authority (BTEA) displayed a decline of 45% in total arrivals from each of its representative offices compared to the same period in 2019. This leads to an average daily loss of 29,000 visitors and BHD 4 million. According to government data for the last quarter of 2019, tourism for the purpose of shopping constituted the largest share of travel into Bahrain at 48%. This was followed by holiday/leisure at 28% and visits to family and friends at 12%. In a bid to attract more international tourists, Bahrain slashed its fees on pre-entry visas, starting January 2020. Entry visas valid for one year would cost BHD 40 instead of BHD 85, whilst five-year valid entry visas would be charged BHD 60, down from BHD 170. On 18 March, Bahrain suspended entry to the country without a letter of prior permission (except for diplomatic purposes) in a bid to contain the spread of COVID-19. The borders reopened for citizens and residents of the GCC as of 5 September and the 10-day quarantine period was waived with a negative polymerase chain reaction (PCR) test result. The King Fahd Causeway linking Bahrain and Saudi Arabia was closed off in March as a precautionary measure and is expected to open on 1 Jan 2021. Renovation activities undertaken when commute was suspended over the initial months of the pandemic have helped increase the bridge’s passenger capacity by 45%. The link holds crucial importance to the tourism industries of both the Gulf nations.
TOTAL INTERNATIONAL ARRIVALS (MILLION)
TOTAL INBOUND TOURISM FLOWS (MILLION)
CAGR: 0.5%
CAGR: 2.9%
12.5
11.1 12
13.7 12.7
11.4
12.3
14
10.2
12
10
8
6
2016
2017
4 2018
2
0
2019
48% 2% 3% 7%
12%
2
4
6
8
10
12
14
Source: Information and eGovernment Authority
Shopping Holiday / Leisure Visiting Family and Friends
TRIPS BY MAIN PURPOSE Q4 2019
Business and Professional Healthcare 28%
Others Source: Information and eGovernment Authority
21
Hospitality Market Overview Before the onset of the pandemic, Bahrain’s hospitality sector was flourishing, with strong performance recorded in 2019. Tourists from neighbouring Saudi Arabia, and business travellers from the GCC and beyond have been the key drivers of tourism in Bahrain. Data from STR Global showed that in Q3 2019 in Manama, hotel occupancy grew 3.8% to 55.5%, ADR rose 0.2% to BHD 58.6 and RevPAR increased 4.1% to BHD 32.5 compared to the year ago. The absolute occupancy level was the highest for a third quarter in the capital since 2010. Also, last year, Manama recorded its first Q1 increase in RevPAR since 2014. While travel and events were postponed in the first part of the year, movement restrictions have given way to effective social distancing health and safety measures that have made events such as the recent Formula 1 Grand Prix a success. Authorities are preparing for a resurgence when safety is restored with a slew of digital campaigns to promote tourism post COVID-19. The latest to be launched is the Ihnee Fee Al Bahrain (Here in Bahrain) that will coincide with the #WeWillMeet campaign to position Bahrain as a key tourist destination. With the upcoming exhibition centre in Sakhir, Bahrain is working to become the preferred location for meetings, incentives, conferences and exhibitions (MICE). As of September 2019, Bahrain was on track to receive 15 million visitors a year by 2022. A number of hotel launches and renovations have been planned to accommodate visitors. Earlier in 2019, the Bahrain Tourism and Exhibitions Authority (BTEA) announced that 22 hotels were set to open in the kingdom by 2023.
UPCOMING HOTEL SUPPLY
Hilton Bahrain Bay Hotel & Residences Manama 210 2020
The Address Hotel Diyar Al-Muharraq 112
Staybridge Suites hotel Manama Al Seef 128 2020
Vida Hotel & Residences Marassi Al Bahrain 160
Bahrain Marina Shangri-La Hotel Manama 250 2022
Mama Shelter Manama 160 2020
Number of Keys 22
Expected completion year
2020 BAHRAIN PROPERTY MARKET REPORT
EXISTING LEISURE ATTRACTIONS Lost Paradise of Dilmun Water Park Adhari Park Gravity Indoor Skydiving Bahrain International Circuit Bahrain National Museum Dive Bahrain National Theatre of Bahrain
UPCOMING LEISURE ATTRACTIONS Marassi Galleria Retail and entertainment destination Diyar Al-Muharraq 13,200 sq m 2021
Avenues Mall Phase 2 Retail and entertainment destination The Avenues Company 38,000 sq m 2022
Harbour Row Retail Retail and entertainment destination GFH Financial Group 14,000 sq m 2020
Size
Opening Year 23
Retail Market Overview Retail has been a key contributor to Bahrain’s economy, mainly supported by the spending power of frequent visitors from Saudi Arabia who largely hail from the Eastern Province. Despite being oversupplied, a number of major retail projects have either been announced or delivered recently and total approximately 300,000 sq m of combined gross leasable area. These projects offer unique concepts and differentiated features to compete with existing and older retail malls and emphasise a lifestyle or experience to attract patrons. These establishments have been designed keeping in mind the need to align with the rising popularity of e-commerce versus traditional retail. Most of the retail developments are either destination malls or retail strips (lifestyle neighbourhood centres). Some of the big projects that have been announced for the kingdom include First Bahrain’s El Balcón open-air format mall with 4,111 sq m of leasable area and a total of 38 retail units of various sizes. Work is underway on the much anticipated Marassi Galleria Mall which is set to be complete by the first half of 2021. Apart from retail and dining options, it will feature a cinema, aquarium, virtual reality theme park, trampoline park, and other entertainment attractions. Construction is also set to begin on phase two of The Avenues – Bahrain, the kingdom’s first commercial and leisure mall which boasts a unique seafront extending over 1.5 km. The second phase of the waterfront project will add a leasable area of 38,000 sq m to the existing 39,000 sq m leasable area. As tourism continues to drive retail in Bahrain, the sector will naturally face headwinds whilst travel remains restricted due to COVID-19 and until normal activity resumes. To help retail players tide over the crisis, the Bahrain government has actively encouraged online businesses and has attempted to increase the share of online transactions. In April, the government launched mall.bh, a virtual mall to help local businesses sell their products online. The portal features over 100 brands and offers items including clothes, home products and electronics.
Seef Mall Marassi Galleria
Al Aali Mall Bahrain City Centre Moda Mall
The Avenues - Bahrain
Major Malls 24
Upcoming Malls
Dilmunia Mall
2020 BAHRAIN PROPERTY MARKET REPORT
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2020 BAHRAIN PROPERTY MARKET REPORT
Industrial Market Overview Bahrain has two central free trade zones, Bahrain Logistics Zone (BLZ), Bahrain International Airport (BIA), an onshore zone called Bahrain International Investment Park (BIIP) and Investment Gateway Bahrain (IGB). Measuring 1 sq km, BLZ is the only customs-free logistics park in Bahrain with bonded and non-bonded areas. BLZ has a tenancy lease price of BHD 4.14 per sq m per year and provides a 20-year renewable land lease for plots starting from 4,000 sq m. Within BIIP, Baytik Industrial Oasis (BIO) features pre-built 2,000—9,500 sq m units available for monthly rent of BHD 2.49 per sq m and 25-year renewable leases. While BIIP is ideal for large manufacturing operations, BIA, which is spread over 19,000 sq m, specialises in cargo sales, trans-shipments, breakbulk cargo handling and customs clearance. In terms of new entrants, Asia-headquartered Kerry Logistics launched a new office in Bahrain to expand its presence in the region. The new office will cater to the automotive, oil and gas, electronics and technology, and fashion and lifestyle verticals with air, sea and road freight, customs clearance and warehousing services. Certain policy measures by the government in the space have been directed at attracting foreign investment into Bahrain. Last year, the government announced that foreign companies would be allowed to own 100% of oil and gas extraction projects. To be eligible, the foreign parent company must have signed, or be in the final stages of signing, an exploration and production agreement with Bahrain.
BAHRAIN’S FREE TRADE ZONES
Bahrain International Airport (BIA)
Bahrain International Investment Park (BIIP)
Bahrain Logistics Zone (BLZ)
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A Word From Our
Chief Economist
Julian roche Chief economist
At a time when investors are focused on governance, an exemplary response to COVID-19, including stringent screening and testing procedures, effective management of international travel, prompt lockdowns, and targeted fiscal measures have seen Bahrain manage the crisis as efficiently as its larger neighbours, and maintain both economic and political confidence. Infrastructure projects have not been reduced in scope, and there continues to be no medium-term threat either to the currency peg or to the government’s hard-won political achievements.
There are undoubtedly significant economic challenges, but they are being met. It was inevitable that continued subdued oil prices would weigh on both the budget deficit and government debt, but as of August 2020, the government can feel justified in its policies: all three major credit agencies are settled on a ‘stable’ ratings outlook, albeit currently at B+/B2. Room for improvement, certainly, and cautious, given oil prices above their March 2020 trough – but along with other GCC countries, a far less threatening macroeconomic picture than the evolving debt spiral of Organisation for Economic Cooperation and Development (OECD) countries. Focus Economics analysts project the economy to contract 3.9% in 2020, S&P Global Ratings expects around 5%, but both agree with the Economist Intelligence Unit (EIU) that there will be expansion in 20211, performance which, if realised, would significantly exceed that of OECD countries. The combination of a BHD 4.3 billion stimulus programme and tax forbearance during 2020 has been expensive—Bahrain’s state budget deficit may reach Fitch Ratings’ forecast of 15.5% this year. But any figure under 20% this year should undoubtedly be counted as a success, and Fitch projects the deficit to narrow to 5.3% by 20222. Debt-to-GDP ratio stands at above 110%: no cause for celebration, but not a threat to financial stability, nor on an inexorable trajectory of growth. Investors can also rely on a further extension of credit from fellow GCC countries to ameliorate any short-term problems, an advantage of strategic importance combined with proximity to larger friends. If the fiscal reforms encouraged by the World Bank earlier in 20203 are implemented in the medium term, the resultant economic diversification, amidst even a level oil price, provides a backstop against any significant deterioration in macroeconomic variables. The real estate market has tracked this evolving macroeconomic picture. Oversupply in some areas and sectors has been balanced by stable, even slightly rising, rents and prices in others. Bahrain’s real estate market has outperformed many major investment destinations this year: the advantage of a market driven by fundamentals which have shown improvement since early this year, and investors who have been committed for the long-term. If the expectations of economists worldwide are realised, and the real estate market continues to track the economy closely, a revival in market conditions in Bahrain is a plausible central forecasting scenario.
1 2
Focus Economics (2020) Bahrain Economic Outlook. July 2020. https://www.focus-economics.com/countries/bahrain Fitch Ratings (2020) Fitch Downgrades Bahrain to ‘B+’; Outlook Stable. https://www.fitchratings.com/research/sovereigns/fitch-downgrades-bahrain-
to-b-outlook-stable-14-08-2020 3
World Bank (2020) Bahrain’s Economic Update — April 2020. https://www.worldbank.org/en/country/gcc/publication/bahrain-economic-update-april-
2020#:~:text=Overall%20growth%20is%20projected%20to,measures%20and%20tapering%20megaproject%20investments.&text=Fiscal%2 consolidation%20 under%20the%20FBP,of%20GDP%20in%202019%2D2020.
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2020 BAHRAIN PROPERTY MARKET REPORT
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