Bahrain Office Rental Rates Remain Flat – Knight Frank

Bahrain’s office rental rates have remained flat as the Gulf state continues to witness political unrest and struggles with oversupply in the market, according to a report by Knight Frank.

Factors such as oversupply and weak occupier demand have left rental rates, which are currently 40 per cent lower than their 2008 peak, struggling to see any movement. However, with developers scaling back office construction activity and with market sentiments stablising, the decline in rental rates is expected to slow down over the next 12 months, the report noted.

In the first half of 2014, occupier demand was limited to small pockets of Bahrain’s office market. Small, fitted-out units were most popular, especially among those tenants looking to avoid the upfront costs of carrying out the work themselves, said the report.

Occupiers are also showing greater preference for shorter leases, in order to give them the flexibility to move in case circumstances should change. In addition, the office market is currently experiencing “churn”, with hardly any new corporate tenants entering the market, stated Knight Frank.

A Q1 report by Cluttons similarly revealed that 90 per cent of current occupier activity is driven by those relocating within Bahrain as some occupiers are starting to take advantage of the weak rates by moving to better quality space.

Bahrain is struggling to boost economic reform as it battles low-level political unrest, persisting in the country since the last three years. Bahraini Shi’ites, who make up the majority of the population, complain of political and economic marginalisation, an accusation the Sunni Muslim government denies.