Bahrain real estate trends: From drive-thrus to cheaper hotels

Reuters/Jakub Porzycki

• Demand increasing for more affordable accommodation
• Local malls and drive-thru F&B options show trend for convenience
• Shift towards living closer to work influences residential market 
• Appetite for quality office space is returning after the pandemic

Economic recovery, an increase in tourism and a reputation as one of the safest places in the GCC for international trade has put Bahrain on the investment map.

And property is one hot sector. 

The total number of real estate transactions in Bahrain in the third quarter of this year was 5,482, according to an analysis by consultancy CBRE.

While the figure represents a marginal drop from 5,532 in Q1, August alone – typically a quiet summer month for deals – saw 2,431 transactions, making it the second most successful month since 2018. 

CBRE’s latest quarterly market update attributed the solid performance on property deals to the kingdom’s resurgent economic climate. Bahrain has seen its fastest GDP growth in more than a decade – reaching 6.9 percent year-on-year in Q2 and forecast to total 5.9 percent for 2022 as a whole.

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This was driven by a rise in VAT from 5 to 10 percent at the start of the year, and growth in the manufacturing, transport and communication sectors. 

Bahrain still has a way to go in terms of strengthening its legal system and property rights, noted CBRE.

The country has also seen its highest rates of inflation since 2016, up to 4 percent in August, from an average of 3.4 percent in the first half of the year. 

Yet strong fundamentals in the hospitality, residential, office and retail markets make Bahraini real estate an interesting proposition for investors.

Here is what’s going on in each sector. 

Hospitality: demand up for affordable hotels 

The 3.5 million-plus international tourist arrivals in the first half of 2022 exceeded the 3.3 million figure recorded for the whole of 2021, according to data from Bahrain’s Information & E-Government Authority.

This boosted the demand for hotels.

For Q3 2022, inbound tourism flows, tourism receipts and total overnight stays all sit higher than in the same period of 2019, before the coronavirus pandemic, indicating that Bahrain is becoming an increasingly appealing destination for international visitors. 

At the same time, the pandemic led to an increase in residents opting for staycations, CBRE said.

A poll of Bahraini residents undertaken by the consultancy in Q3 this year found that, when planning staycations, the majority (71 percent) of respondents said they prefer affordable hotels compared to 29 percent who prefer luxury. 

Despite this, many of Bahrain’s recent hotel openings have been in the luxury segment. Hilton Hotels and Resort’s Bahrain debut saw the US operator open a five-star, 45-storey hotel, called the Hilton Bahrain, along the Al Fateh Highway in August. 

The UAE’s upscale Jumeirah Group started welcoming guests at its luxury Jumeirah Gulf of Bahrain Resort & Spa on Bahrain’s relatively untouched West Coast this month. Last week Four Seasons announced plans with local developer Bayside Developments to build 112 luxury serviced apartments in Bahrain Bay.

Retail: drive-thrus rise in popularity 

The majority of respondents (60 percent) to CBRE’s poll said they prefer drive-thru over eat-in when it comes to food and beverage (F&B) options.

This preference is being borne out by a growing number of drive-thru units, and the ongoing expansion of fast food and coffee shops, CBRE said, with global brands such as Costa Coffee and Starbucks all having opened in Bahrain in recent years. 

Other retail trends impacting real estate development in the kingdom include the rise of convenience shopping, leading to an increasing number of community retail plazas opening in Bahrain.

However, in CBRE’s poll there was a “relatively even split between demand for larger destination malls offering more retail variety, and smaller community and neighbourhood retail that require less travel time”.  

Residential: buyers search for shorter commutes 

In both the sales and rental markets, rates saw only marginal changes in the past two quarters, CBRE’s analysis of official Bahrain figures showed.

Average apartment sales prices increased by 1.3 percent quarter-on-quarter in Q3 and apartment rents fell by 1.6 percent.

The biggest decline by location was seen in apartment rents in the Capital Governorate, at 5.9 percent, as rising supply placed downward pressure on prices. 

Meanwhile, villa sales prices dropped slightly by 0.3 percent, while rental rates increased by 4.1 percent, driven mainly by upticks in prices in both the Muharraq and Capital Governorates districts after a slump in Q2. 

Overall, location is increasingly important for buyers and renters in Bahrain, evidenced by an emerging shift towards living closer to work rather than near leisure destinations.

CBRE’s poll found that this year, 60 percent of respondents said they prefer to live near work, compared to 40 percent preferring to live near lifestyle-related facilities.

This compares to a 20 and 80 percent split in 2021, when more of the workspace was working from home due to the Covid pandemic.  

“This shift appears to correspond with more organisational directives pushing for employees to return to the office, rather than working from home, and traffic issues experienced across the country during rush hours,” the consultancy said. 

Offices: demand for space rebounds after two-year lapse

The pandemic and a more sluggish economy caused a drop in occupier space requirements in Bahrain, with demand falling by 11 percent on average between 2019 and 2022, according to CBRE. 

Appetite for quality office space is starting to return. The consultancy said it has witnessed a 27 percent increase in the number of enquiries it has received in Q3 2022, compared to the same period last year.

But Grade A property, the highest quality and location of office stock, is scooping up the lion’s share of that demand by offering competitive rates and flexible solutions to attract tenants.

The result is that lower quality and older Grade A and Grade B properties are struggling to fill up available space, and this trend is expected to continue. 

Real estate projects in Bahrain

Mixed use
Onyx Skyview, Bahrain Bay – Kooheji
Onyx, Bahrain Bay – Kooheji
Marassi (including Marassi Park, Marassi Terraces, Galleria Mall)

Residential
Aseel El Nasayem and Layl El Nasayem villas, Al Naseem – Diyar al Muharraq
Ras Hayan Village, Nuun Al Bahrain and Strata at Dilmun – Four Seasons
Amwaj Beachfront – Esterad

Commercial
Sayacorp Tower, Bahrain Financial Harbour – Sayacorp
Future Generation Reserve Tower, Bahrain Bay – Ministry of Finance & National Economy