Mall expansion fills ‘lifestyle’ gap in Bahrain retail market

• 244 retail units, entertainment, ice rink, supermarket and parking
• Targets residents and visitors mainly from Saudi Arabia and Kuwait

A massive new expansion of one of Bahrain’s biggest malls is a sign of renewed confidence in the Gulf kingdom’s retail sector as it looks to attract more Saudi shoppers from across the border, according to experts.

The Avenues Company, a wholly owned subsidiary of Al-Sorouh Management Company, has announced the appointment of Nass Group as the main contractor to begin work on the construction of The Avenues Bahrain phase 2 expansion project.

The extension will add an additional 41,200 square metres of leasable space, which will include 244 retail units, two entertainment areas, an ice rink and a supermarket, as well as a basement parking, bringing the total leasable area in both phases to approximately 80,000 sq m.

• Bahrain’s non-oil economy has wind in its sails
• The Gulf island state’s vision for recovery and growth

Construction is set to start next month and expected to be completed by the first quarter of 2024. Upon completion, The Avenues Bahrain will be the largest waterfront shopping and entertainment destination, with a total length of 1.3km.

Mansoor Ahmed, executive director, Middle East & Africa Region for Colliers said: “The supply of lifestyle retail destinations and flagship retail projects remain undersupplied compared to the population growth and income levels. The expansion of The Avenues Bahrain is expected to bridge this gap.”

He added: “Bahrain is also attracting demand from the eastern province of Saudi Arabia. This has created additional demand for more family entertainment centres, F&B and leisure related activities… due to lack of quality malls in the eastern province of Saudi Arabia.”

Heather Longden, director of advisory and transactions at CBRE in Bahrain, added that phase 2 of The Avenues is a “landmark development” for the country’s retail sector that is “likely to draw a larger share of retail footfall”.

Bahrain’s retail sector has seen a surge in development over the past decade. There is currently a recorded 927,000 sq m of total retail stock across malls, with a further 200,000 sq m in the pipeline. 

“While the growing supply raises some concerns over pressure on occupancy and rental rates, both of these indicators are presently relatively stable,” noted Longden. 

CBRE’s biannual operational occupancy survey, which is conducted across a selection of significant retail centres, recorded a relatively marginal drop of 3.7 percent in operational occupancy from H2 2021 to H1 2022, with little change in average rental rates.

Stephen Flanagan, head of valuation and advisory for MENA at Knight Frank, said the 40,000 sq m-plus addition of gross leasable area in phase 2 of The Avenues Bahrain was “a positive and welcome addition to the retail offering”. 

“Targeting both residents and the numerous visitors that come to Bahrain predominantly from Saudi Arabia and Kuwait, it further activates the Bahrain Bay area which is seeing continued residential and hospitality development and establishing itself as Manama’s commercial core,” he said.

Waleed Khalid Alsharian, director of Al-Sorouh Management Company and CEO of Mabanee Company, added: “The expansion plans will cement The Avenues Bahrain as the largest development in Bahrain Bay and the Central Governorate, as well as a destination for citizens, tourists, and businessmen alike from the Gulf region and beyond.”

Distinctive districts

In addition to the extension of the existing Grand Avenue, new districts such as The Forum, Grand Plaza, Electra, and the Souk will be created with their own character expressed through distinctive architectural styles. 

“The expansion of The Avenues, along with Bahrain Mall and Dana Mall that are carrying out extensive renovation works, is a further testament to Bahrain’s brick-and-mortar retail and leisure attractiveness for residents and international visitors alike,” said Hashim Kadhem, director and head of professional services at Savills Middle East.

“There has been a shift in global retail consumption patterns driven by technological advancements and more recently, the disruptions brought upon by the pandemic. This has accelerated the shift to online retail globally and Bahrain has not been immune to this shift.

“However, retail in the region continues to thrive as an experiential offering and the Avenue is a testament to good quality projects performing better than the general market.”

“Occupancy levels in The Avenues phase 1 are in excess of 95 percent, providing confidence to commence construction on phase 2,” Knight Frank’s Flanagan noted. He said that monthly retail rents in Bahrain average between BD11-13 per square metre, with super regional malls averaging in excess of BD20 per square metre. 

According to CBRE, although footfall has reportedly increased significantly since the easing of Covid-19 related restrictions, existing supply continues to hold “material vacancy rates”, with new supply likely to further impact the vacancy rate. It added that consumer trends are also evolving, with changing attitudes towards types of shopping centre experiences and the rise of e-commerce.

Inflation in Bahrain for the year to June reached its highest since 2016 at 3.4 percent, resulting in the Central Bank of Bahrain (CBB) decision to raise interest rates. Employment rates have risen by more than 3 percent this year compared to 2021 although they remain 11.8 percent below 2016 figures.

Short-term growth forecasts from Oxford Economics suggest Bahrain’s real GDP growth from 2.8 percent to 4.4 percent in 2022, driven by the non-oil sector at 7.8 percent.

Cashless transactions in the kingdom are also increasing as they spiked 13.1 percent to BD309 million last month when compared with the same month of 2021, according to data from the CBB.

A total of nearly 12.4 million point-of-sale and e-commerce transactions were recorded during July, 72.4 percent of them contactless.