Is the office market in Bahrain the next star?

When looking for a good real estate investment in the Gulf one might want to consider buying an office to let in Bahrain.

When buying, you can easily end up paying 50% more per square meter for an office of equal quality and location in Dubai compared to Bahrain. But then again, the rents are also equally higher in the busy Emirate.

However, while the favorite topic in the regional real estate news currently is whether or not the market is witnessing a Dubai bubble about to burst, there seems to be general consensus that Bahrain has only just embarked on the journey. And - maybe even more important from a risk perspective - is growing at a slightly more controlled pace.

In other words, one might speculate if buying an office to let in Bahrain is providing a good balance between risk and sustainable return.

It is a fact that there is considerable under supply of good office meters in Bahrain. Obviously the fact that it is mandatory when establishing a company in Bahrain to have a lease agreement in a building approved by the municipality for commercial use, helps stimulating the demand.

But also the economy’s high growth rate and the modernization of the legislative and administrative framework for doing business in and with the Kingdom is attracting a high number of foreign companies to set up shop every month. One obvious example is the financial sector where nearly 400 financial institutions from abroad have been licensed and established in Bahrain.

And there is no reason to think that this development shouldn’t continue for the years to come.
Currently a quality office meter in a good location in Bahrain could be found at 2,500 USD, and with a rent on the good side of 350 USD per year a nice yield is in sight.

The only problem seems to be that a limited number of large scale prestige developments are announced, with Bahrain Financial Harbor as the prime example of one such flagship project. While this is obviously good from the point of view that it helps keeping up the yield, the flip side of that coin is that it will require some help from someone on the ground with a good feeling for what’s hot and what’s not if investors from abroad want to seize this opportunity.

But then again - being able to spot the good opportunities before they become too well known in the market, isn’t that what making a good investment is all about…..