MANAMA: The office rentals in Bahrain which have been under pressure may further hit by the implementation of the proposed value added tax (VAT), according to Culttons.
The Cluttons Bahrain Spring 2017 Property Market Outlook said the year 2016 proved another stable year for Bahrain’s office and retail property markets with no movement in headline rents reported across the Kingdom’s key retail submarkets in Q1 of 2017. In the office market, rents have slipped in some locations to the most attractive levels on record.
“Our agency team has worked with several landlords who have now broken rank to lower rates and drive occupancy levels in the office market. In addition to lowering rents, we are working with them to focus on incentives and high-quality property management services to create more favourable leasing terms in a difficult market – this includes free parking, for example,” Harry Goodson-Wickes, Head of Cluttons Bahrain and Saudi Arabia, said.
“Our concern for the outlook of the office market remains with the proposed Value-Added-Tax (VAT) introduction across the GCC, and the potential increase in operating costs for international occupiers who are already grappling with a strong US dollar. An extra 5% charge on top of rents and general operating costs may well suppress activity for longer. This does not however currently sit in our central scenario and we are optimistic for a heeded approach to allow the market some time to gain footing, with signs of stabilisation, or even a recovery in 2018,” Faisal Durrani, Head of Research for Cluttons, said.
New schemes in the retail sector such as The Avenues, which is being developed at a cost of BD 45 million and is planned to open later this year; in addition to the region’s largest IKEA store, scheduled to open in mid-2018, underscore the confidence being placed in the sector by occupiers as Bahrain continues to strengthen its retail offering. The Cluttons report concludes that this has been achieved by drawing on appetite from weekend tourist traffic from Saudi Arabia, while also catering to domestic appetite for a more sophisticated retail offering.
