Bahrain's retail sector is the best performer in the commercial market.

Bahrain's retail industry has remained the best performing sector in the commercial market, according to Cluttons' latest Bahrain Spring 2014 Commercial Market Outlook survey, with developers capitalizing on the buoyant demand for retail schemes in Manama. doha sale

Against the backdrop of a relatively depressed broader commercial market, Cluttons report highlights the retail sector's resilience. The high level of Saudi tourist traffic flowing into Bahrain on weekends is a major contributor to the retail market's strong success. Rents in the office sector, on the other hand, are expected to stay stable or slightly lower in 2014.

While Bahrain City Centre has dominated the retail landscape since its opening in 2008, focus has now shifted to areas north of Manama, a rapidly growing population center dominated by expats.

Diyar Al Muharraq's BD 1.2 million mixed-use scheme to the north east of Manama, which will be anchored by Dragon City, Bahrain's response to Dubai's Dragon Mart complex, is one such creation. The new shopping mall will target Chinese retailers as the government seeks to strengthen trade ties with China, while Bahraini and Saudi retailers are also expected to have a strong presence.

Cluttons Bahrain's Head, Harry Goodson Wickes, tells World Property Channel, "The capacity of rentals to cope with the sudden increase in space will be put to the test, despite the fact that a range of retail schemes are coming to market, including the Lagoon at Amwaj Islands. In the short term, however, we expect rents to remain stable, especially in schemes near dense population centers. For example, we have seen strong demand this year at The Lagoon, and we expect the mall to hit capacity as retailers rush to capitalize on demand from nearby households."

Following the economic downturn and a time of national tensions, occupier activity in the office market remains low across Bahrain, according to the survey, with morale gradually improving. The supply overhang from the growth spurt that preceded the 'great' global recession has exacerbated the low activity levels.

Huge projects like the Bahrain Financial Harbour and the 27-story Millennium Tower, both of which are still aiming for high occupancy levels, demonstrate this. Cluttons predicts a further reduction in rents in such schemes as landlords try to entice tenants away from older buildings across the Kingdom.

This is reflected in current market conditions, as businesses are beginning to take advantage of low rents by relocating to higher-quality space. Occupier specifications are currently in the range of 100 to 200 square meters, compared to less than 100 square meters at this time last year, indicating a slow but steady increase in occupier trust. According to the Cluttons survey, over 90% of current occupier operation is powered by those relocating within Bahrain, with the remaining requirements coming from those new to the kingdom. Newcomers to the market frequently tend to have budgets that are significantly higher than current market rates; but, as they become familiar with the local dynamics, these are easily modified downwards.

The government's heavy investment in new energy and transportation infrastructure, according to the study, is also helping to lift occupier activity from this community. The hydrocarbon industry is the only other prominent sector driving office space demand.

"We expect office rents to stay close to, or at current levels for the remainder of the year," Goodson Wickes added, "as overall morale has yet to completely recover; however, general sentiment has strengthened over the course of 2014; a trend we expect to continue."

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