2020 Bahrain Property Market Report

PROPERTY MARKET REPORT

About Established in 2008, Cavendish Maxwell is one of the largest and most respected property consultancies in the region. An influential partner and trusted advisor to key stakeholders in real estate markets throughout the Middle East and Africa, we offer a comprehensive range of exceptional property services across a diverse mix of sectors and asset classes.

Cavendish Maxwell is a certified member firm of the Royal Institution of Chartered Surveyors (RICS), bringing together a world-class team of handpicked property consultants and surveyors, unmatched elsewhere in the region.

Our team of highly qualified professionals is trusted by real estate market stakeholders throughout the region, including international and domestic banks, property developers, governments, owners and investors, asset managers and professional services firms. We service a diverse mix of specialist property sectors including, residential, retail, offices, hospitality, healthcare, education, industrial and logistics.

Cavendish Maxwell also publishes independent reports, prepared to globally accepted standards, for loan security, bank lending, audit, insurance reinstatement, dispute resolution, risk management, debt recovery, performance analysis, purchase and sale advice, and third-party reliance purposes.

2

2020 BAHRAIN PROPERTY MARKET REPORT

Foreword The trajectory of 2020 has been unlike any other, quickly going from business-asusual to social distancing measures and restrictions in a bid to contain the spread of a highly contagious virus. At the same time, the focus on diversification is greater than ever, with hydrocarbon prices once again volatile amid increased supply and worries of weak global demand.

At this crucial time, support from authorities has been extended to help businesses across sectors survive and minimise monetary and manpower loss. As the situation continues to evolve, the impact on various sections of the economy, including real estate, is yet to be fully ascertained.

Against this backdrop, in our latest report we take a look at the performance of Bahrain’s real estate market with a focus on the measures introduced to mitigate the economic impact of the COVID-19 contagion. The analysis provides a comprehensive overview of the residential, commercial, retail, hospitality and industrial sectors with the aim to be a valuable tool in our clients’ decision-making process.

Contents 04

Macroeconomic Overview

18

Residential Market Overview

06

Measures To Mitigate The Economic Impact Of COVID-19

20

Office Market Overview

08 04

Foreign Direct Investment Overview

21

Tourism Overview

09 04

Demographic Overview

22

Hospitality Market Overview

10

Labour Market In Bahrain

24

Retail Market Overview

12

Bahrain Economic Vision And Sustainable Development Goals 2030

27

Industrial Market Overview

14

Infrastructure Projects

28

A Word From Our Chief Economist

3

Macro Economic Overview When oil prices collapsed in 2014, energy-dependent Bahrain’s fiscal deficit ballooned and debt levels rapidly increased.

With the help of the Fiscal Balance Programme (FBP) and an external credit line to the tune of BHD 3.77 billion extended by neighbours Saudi Arabia, Kuwait and the UAE, Bahrain has been able to lower its borrowing costs.

In addition, Bahrain has undertaken several reforms and diversification efforts to return to fiscal stability by 2022. These include implementing Value Added Tax (VAT) at 5%, providing a voluntary retirement plan for government workers, curbing public expenditure and ramping up non-oil revenues. The Electricity and Water Authority (EWA) began gradually lifting the electricity subsidy since 2019 and is planning to completely remove it by 2023 whilst ramping up the use of clean energy.

Whilst efforts continue to eliminate the fiscal deficit, including plans to approach global capital markets to help fund fiscal reforms, the COVID-19 pandemic is expected to put a spanner in the works, at least temporarily. According to the International Monetary Fund (IMF), Bahrain’s fiscal deficit is expected to increase to 15.7% of gross domestic product (GDP) in 2020 from 10.6% in 2019.

GROSS DOMESTIC PRODUCT According to data from the Information and eGovernment Authority, between 2010 and 2019, Bahrain’s GDP increased from BHD 9.7 billion to BHD 14.5 billion at current prices, registering a compound annual growth rate (CAGR) of 4.6%. At constant prices, GDP grew from BHD 9.7 billion to BHD 12.9 billion with a CAGR of 3.2%. Compared to 2018, GDP in 2019 increased 2.4% at current prices and 1.8% at constant prices.

Mining, financial services and manufacturing were the top three contributors to GDP growth in 2019. The oil sector grew by 2.2% at constant prices but shrank 3.9% at current prices. Reflecting the heightened efforts to achieve diversification from oil revenues, the non-oil sector expanded by 17.5% and 32.9% at constant and current prices, respectively.

Whilst the oil price decline of 2020 has impacted major producers and exporters in the Gulf Cooperation Council (GCC) and the wider region, Bahrain has a smaller contribution to production and is not a core Organisation of Petroleum Exporting Countries (OPEC) member. This is likely to slightly mitigate the impact of weak crude oil prices on GDP growth.

Similar to other global economies, Bahrain will witness a contraction in economic growth in 2020, with a rebound expected in 2021. The International Monetary Fund estimates Bahrain’s economy to shrink 3.6% during the current year and expand 3% in 2021, subject to the global economic recovery post the pandemic. Mitigation measures introduced by the Bahrain government, including a BHD 4.3 billion economic stimulus package, are expected to benefit various sectors, particularly small and medium enterprises (SMEs) and the private sector.

4

2020 BAHRAIN PROPERTY MARKET REPORT

TOTAL GDP 2010 – Q2 2019

16 14.5

14.2

14

13.3 12.5

12.2

12

11.5

GDP (BHD Billion)

10.8

10

9.7

9.7

11.3 10.2

12.4

12.1 12.0

11.6 11.6

12.7

12.9

10.8

9.9

8 6 4 2 0 2010

2011

2012

2013

2014

GDP at Current Prices

2016

2015

2017

2018

2019*

GDP at Constant Prices

Source: Information and eGovernment Authority

GDP PER CAPITA 2019

GDP BY SECTOR AT CONSTANT PRICES 2019

In 2019, Bahrain’s GDP per capita stood at BHD 8,865, down 2% from 2018 when it was BHD 9,050.

17.8%

37.4%

16.5% 3.8%

7.3%

Mining Financial Services Manufacturing

14.5%

Construction Real Estate Others

Source: Information and eGovernment Authority

GDP Per Capita (BHD)

20,000 16,258

15,000 12,082 8,865

10,000

8,728 5,837

5,000 0

UAE

‫تةنمكحخحِآل‬KUWAIT BAHRAIN

KSA

OMAN‫تةنمكحخحِآل‬

Source: World Bank

5

Measures To Mitigate The Economic Impact Of COVID-19 The government guaranteed full salary support for Bahraini private sector employees between April and June 2020 and 50% salary support between July and September.

Automatic payment of businesses’ Electricity and Water Authority utility bills was covered between April and July up to the amount incurred during the same period in 2019. Likewise, individuals and families were given the same coverage up to their 2019 spend, however, support has carried on through the year. Meanwhile, the government has restructured administrative budgets to offset the cost of these stimulus measures.

Exempting all individuals and businesses from municipal fees for three months from April 2020.

Exempting all businesses from government-owned industrial land rental fees for three months from April 2020.

Exempting all tourism-related industry from tourism levies for three months from April 2020.

Terminating monthly work fees and fees for issuing and renewing work permits for three months from April 2020.

Doubling the Liquidity Support Fund to nearly BHD 200 million.

Increasing the Central Bank of Bahrain’s loan facilities to BHD 3.7 billion to allow debt instalments to be deferred and extra credit to be extended.

The redirection of all Tamkeen programmes (semi-autonomous government agency that provides loans and assistance to businesses) to support adversely affected companies, as well as the restructuring of all debts issued by Tamkeen.

COVID-19 FACTS ACTIVE CASES

2,305

Data as of 12 December 2020

Source: Bahrain Economic Development Board

6

RECOVERIES

87,025

DEATHS

348

2020 BAHRAIN PROPERTY MARKET REPORT

7

Foreign Direct Investment Overview Between 2014 and 2019, foreign direct investment into Bahrain increased from BHD 9,680 million to BHD 10,900 million, registering a CAGR of 2.4%. The main source countries for FDI in Bahrain in 2019 were Kuwait, UAE, Ireland and Saudi Arabia.

Bahrain has undertaken several efforts to attract foreign investment inflows. The country boasts the lowest corporate and personal taxes among Gulf nations, has no restrictions in free trade zones, and permits ownership by foreign businesses in over 95% of economic activities.

FDI in Bahrain is poised for further growth as the country undertakes additional efforts to attract international investor interest.

In 2019, Bahrain halved the amount required by expatriates to invest in the country to be eligible for self-sponsorship residential visas.

Foreigners with a minimum BHD 50,000 stake in any financial, trade, industrial, tourism project or any other business or investment schemes can apply for the residence visas.

Helped by the reforms and policies implemented, Bahrain’s performance on the World Bank’s Doing Business 2020 study also improved from the previous edition. The country moved up 19 places to secure the 43 rd spot among 190 countries.

BAHRAIN’S RANKING AGAINST 190 COUNTRIES OVERALL RANK: 43 1 17

17 67

51

72

77

94

Dealing with Starting a Getting business construction permits electricity

Registering property

Getting credit

Protecting minority investors

Paying taxes

Trading across borders

59

60

Enforcing contracts

Resolving insolvency

Source: World Bank

FDI INFLOW 2018–2019

FDI Inflow (BHD Million)

11,000 10,000

9,680

9,705

9,796

FDI INFLOW BY SECTOR, 2019 10,333

10,902

10,900

9,000 8,000 17%

7,000

83%

6,000 5,000 4,000 2,000 1,000 0 2014

2015

2016

2017

Source: Information and eGovernment Authority

8

2018

2019

Financial Sector

Non-Financial Sector

Source: Information and eGovernment Authority

2020 BAHRAIN PROPERTY MARKET REPORT

Demographic Overview According to the Bahrain Open Data Portal, Bahrain’s population increased 3% between 2007 and 2019, reaching over 1.48 million. During this period, male population registered a CAGR of 3.2% while the female population grew at a CAGR of 2.7%. Bahraini nationals comprised 47% of the total population whilst expats constituted the remaining 52%.

1,483,756

1,503,091

1,501,116

1,423,726

1,370,322

1,314,562

1,253,191

1,208,964

1,195,020

1,228,543

1,039,297

1,103,496

1,178,415

BAHRAIN POPULATION 2007–2019

1,600,000

563,192

556,227

535,337

523,957

508,075

464,810

448,515

453,537

446,418

426,906

407,223

800,000 600,000

731,997

764,357

741.483

760,449

788,381

806,487

846.365

888,389

951,312

946,864

920,564

200,000

676,590

400,000 632,074

Population

1,000,000

464,186

1,200,000

549,804

1,400,000

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: Information and eGovernment Authority

Female

Male

POPULATION BY GOVERNORATE 2019 600,000

539,212

500,000 369,954

400,000 300,000

306,244

268,346

200,000 100,000 0

Capital

Muharraq

Northern

Southern

Source: Information and eGovernment Authority

9

Labour Market In Bahrain At the end of Q2 2019, the working population in Bahrain stood at 748,047 people. Expats accounted for nearly 80% of the workforce at 594,944 and Bahraini locals comprised the remaining share at 153,103.

Compared to Q2 2018, the number of Bahraini employees decreased 3.6% as the second phase of the voluntary retirement scheme took effect during Q2 2019.

According to the Labour Market Regulatory Authority (LMRA), the median monthly wage for Bahrainis was BHD 532 in Q2 2019. Compared to the same quarter a year ago, the wage declined 1.1% from BHD 538. In the private sector, the median wage for Bahrainis was BHD 431 in Q2 2019, up 3.6% from the year-ago period, whilst in the public sector, the median wage was BHD 696 declining 1.7% from the year-ago period.

10

2020 BAHRAIN PROPERTY MARKET REPORT

TOTAL EMPLOYMENT

748,047

762,393

763,112

787,190

725,113

687,147

666,629

635,717

598,226

599,348

598,491

900,000

575,798

CAGR 2.4%

800,000 111,002

Employed Population

700,000

98,905

90,591

86,349

111,002 103,728

600,000

107,711

95,297 79,212

84,002

87,420

448,849

463,989

459,323

454,990

479,273

496,090

512,076

546,572

611,229

599,714

608,220

605,518

54,408

55,290

56,023

55,816

61,147

66,811

67,360

67,539

64,959

64,493

63,582

56,180

72,541

500,000 400,000 300,000 200,000 100,000 0

2008

2009

2010

2011

2012

Public Sector Employment

2013

2014

2015

Private Sector Employment

2016

2017

2018

Q2 2019

Domestic Workers

Source: Labour Market Regulatory Authority

TOP EXPAT DESTINATION BY RANK, 2019

7

32

No.

No.

Bahrain

No.

Oman

40

No.

UAE

64

Kuwait

Source: InterNations

11

Bahrain Economic Vision And Sustainable Development Goals 2030 Bahrain has aligned the Sustainable Development Goals (SDGs) of United Nations Member States with its national development agenda.

Bahrain’s Economic Vision 2030 is based on the guiding principles of sustainability, competitiveness, and fairness.

Interdependent on one another for success, the 17 SDGs together aim to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030.

12

2020 BAHRAIN PROPERTY MARKET REPORT

With a decade remaining to achieve the objectives, Bahrain has already recorded success on several parameters: 0% - Population living in extreme poverty.

37.4% - Average economic growth in the past decade. +35% - Public expenditure in the budget on health, education, and social protection.

100% and 84% - Net enrolment ratio for primary and secondary levels, respectively. Basic education is free and compulsory, thus eliminating illiteracy.

Maternal mortality rate at 28.6 deaths per 100,000 live births versus 226 deaths globally.

Mortality rate of children under five at 9 deaths per 1,000 live births versus 44 deaths worldwide. 55% - Supervisory positions held by women, with 53% participation in the public sector and 33% in the private sector.

4% - Total unemployment with the private sector contributing to lower the rate and provide equal high paying employment opportunities.

65% - Population benefited from public housing services.

5 - New sustainable cities being developed.

100% - Coverage reached of safe water, sanitation and clean energy networks.

45,000 enterprises and 125,000 individuals – Beneficiaries of financial and training support of The Labor Fund (Tamkeen).

June 2019 – Bahrain announces a ban on plastic bags to be implemented in phases.

13

Infrastructure Projects Bahrain continues to deliver on its infrastructure plans, with the benefits not limited to the construction sector but spilling over to the larger economy.

The Aluminium Bahrain’s (Alba) Line Six expansion project, which makes it the largest aluminium smelter in the world outside China, and the Bahrain Petroleum Company (BAPCO) Modernisation Programme are some of the major infrastructure developments undertaken across Bahrain.

Despite the volatility in oil prices and ongoing fiscal consolidation, Bahrain has continued to develop infrastructure projects with BHD 221.7 million in new tenders in H1 2020, according to data from the Bahrain Tenders Board. These investments underscore the government’s commitment to their extensive pipeline of infrastructure projects.

The government has approved a number of major projects including:

Airport expansion project valued at BHD 415 million.

Expansion and upgrade at Bahrain Petroleum Company’s Sitra oil refinery valued at BHD 2.3 billion.

Al Dur 2 Independent Water and Power Project (Phase II).

Sheikh Zayed Highway extension project valued at BHD 23 million.

Rail line development part of the 2,200 km GCC railway project.

Infrastructure work at five new housing towns—Salman City, Khalifa City, East Hidd Town, East Sitra Town and Al Ramli District—valued at BHD 245 million.

Construction of the Bahrain International Exhibition and Convention Centre in Sakhir spanning 308,000 sq m.

14

2020 BAHRAIN PROPERTY MARKET REPORT

15

Upcoming infrastructure projects

16

2020 BAHRAIN PROPERTY MARKET REPORT

Liquified Natural Gas Terminal 2016 to 2020 The facility includes an off-shore gas receiving, storage and regasification plant.

The liquified natural gas terminal will provide energy for the industrial and manufacturing zones to meet energy needs on demand.

The terminal will support the Hidd Industrial Area of the Salman Industrial City with the energy it needs to support growth, a boon to the wider economy.

New Passenger Terminal, Bahrain International Airport 2020 – (Possibly delayed) The expansion work of the existing terminal includes: 4,600 sq m departures hall.

Two premium class check-in halls and 108 check-in desks.

24 passport control booths.

28 lanes.

9,000 sq m duty-free retail, food and beverage (F&B) zone.

Airline premium class lounges.

24 jetty-served departure gates.

Additional health facilities to check for COVID-19 cases.

Bahrain Petroleum Company (BAPCO) Refinery Modernisation 2022 Upgrade to enable total refinery throughput to increase to a maximum of 380,000 barrels per day (bpd).

Refinery’s capacity to increase 42% from the existing 267,000 bpd.

Al Fateh Highway upgrade 2022 Estimated budget is over BHD 32 million.

Widening of Al Fateh Highway to five-lanes, three footbridges, two utility tunnels, two-lane bridge at Sheikh Daij junction from Al Fateh Highway to Prince Al Saud Al Faisal Highway, etc.

Project funded by Saudi Fund for Development.

King Hamad Causeway (Dammam - Bahrain Causeway) 2025 Bridge connecting Bahrain and Saudi Arabia to stretch over 25 km.

Causeway expected to include two lanes for trains and one lane for cars.

North Manama Causeway Phase 2 and Busaiteen Link 2026 Construction of 21 km of roads, 11 junctions, and a new signature bridge.

Part of the Bahraini ministry’s strategy to develop road infrastructure by constructing corridors to develop mobility and accessibility.

The Bahrain Metro Project (BIS63) 2030 Part of the kingdom’s Public Transport Masterplan 2030.

Network spanning 184 km to be made up of six lines.

Phase One to have two lines running 30 km and covering 20 stations.

Red Line to link Bahrain International Airport with the suburban Seef District covering nine stations.

Blue Line to start from Juffair suburb and end at Isa Town covering 11 stations.

17

Residential Market Overview In general, oversupply continues to govern residential property prices and rents in Bahrain. Higher vacancy rates coupled with completion of projects under construction are factors increasingly pressuring landlords to attract tenants.

Recently completed projects include Eagle Hills’ Diyar Marassi Shores Residences project in Diyar Al Muharraq. The 11-storey development offers high-end apartments ranging from studios to five-bedroom units.

In recent years, demand for affordable housing units for low- to medium-income families has significantly increased. As of March 2019, approximately 55,000 Bahraini families were on the government’s waitlist for subsidised housing. Under its Economic Vision 2030 programme and the Sustainable Development Goals mandate, the government is progressing towards reducing the waiting list for Bahraini beneficiaries.

According to the government action plan 2015-2018, 40,000 housing units were to be built in various towns and villages across the kingdom.

Under the following government action plan 2019-2022, the private sector committed to the construction of 25,000 housing units. These housing developments are located in areas such as East Hidd City, Diyar Al Muharraq, Salam City (previously known as Northern City), Al-Luzi area, Wahat Al-Muharraq and Tubli Garden. In addition, the Mazaya Programme has provided benefits to more than 5,000 Bahraini citizens to date with sharia-compliant financing with minimum down payments as low as 10%.

Bahrain has recently introduced enhanced processes and policy reforms to promote real estate sector activity. Benayat, a new streamlined platform, has reduced the time taken to obtain a construction permit to five days versus several months taken in the past. Bahrain has also adopted international real estate standards with the launch of the Bahrain Valuation Standards (BVS) aimed at higher protection for investors and banks, and greater transparency and accuracy in the overall market.

Confidence in the sector is evidenced in the growth in mortgage activity — banks in Bahrain issued mortgage loans worth BHD 1.89 billion for the period January–October 2019 compared with BHD 1.8 billion in all of 2018.

New RERA laws

Developers selling off-plan property are required to obtain a “Developer’s Licence” prior to implementing any development activities. On obtaining the license, details will be recorded in a ‘Developer’s Register’ which will be stored by RERA include information such as development plans, specifications, approved architectural and structural engineering plans, details of escrow account, financial guarantees, building permit, valuation of the development, title deeds, development plan and milestones (phasing schedule, completion date, etc.).

Going forward, individuals will not be able to practice both valuation and brokerage activities at the same time, but companies can continue to do so with the appropriate licenses.

Other laws have been amended and added in areas that include joint ownership, Home Owners Associations, and Registration of Rights, with non-compliance attracting various penalties and fines.

New valuation system In October 2019, RERA launched a new valuation standard, Bahrain Valuation Standards (BVS) in collaboration with the IVSC (International Valuation Standards Council) and RICS (Royal Institute of Chartered Surveyors). The new system complies with International Valuation Standards (IVS) and will enable enhanced market transparency and efficiency, protecting investors and the banking sector.

18

2020 BAHRAIN PROPERTY MARKET REPORT

Diyar Al Muharraq Master Plan Seven man-made islands on the northern shores of Muharraq with residential, commercial and retail spaces.

UPCOMING PROJECTS

Bahrain Bay Master Plan Three islands with residential, commercial and retail spaces.

Harbour Heights and Harbour Row Three luxury high-rise buildings and adjacent midrise mixed-use waterfront buildings in the heart of Bahrain Financial Harbour.

East Hidd Housing Development Residential units and plots.

SALES PRICE

MONTHLY RENT

SALES PRICE

MONTHLY RENT

BHD 700 – 1,000 per sq m Studio – 3BR

BHD 230 – 1,350 Studio – 3BR

BHD 46,000 – 250,000 per sq m Studio – 3BR

BHD 280 – 1,400 Studio – 3BR

SALES PRICE

MONTHLY RENT

BHD 100,000 – 150,000 per sq m Affordable Villas SALES PRICE

MONTHLY RENT

SALES PRICE

BHD 500 – 750 per sq m Studio – 3BR

BHD 250 – 1,200 1BD – 3BR

BHD 250,000 – 500,000 per sq m Luxury Villas

BHD 500 – 800 Affordable Villas MONTHLY RENT N/A – Construction Luxury Villas

Diyar Al Muharraq Amwaj Islands SALES PRICE BHD 730 – 1,000 per sq m 1BD – 3BR

MONTHLY RENT BHD 450 – 1,650 1BD – 3BR

Seef Reef Island Saar

Al Juffair

Janabiya SALES PRICE SALES PRICE

MONTHLY RENT

BHD 120,000 – 450,000 per sq m 3BR – 6BR

BHD 450 – 1,700 3BR – 6BR

Source: Cavendish Maxwell

BHD 500 – 800 per sq m Studio – 3BR

MONTHLY RENT BHD 250 – 1,200 Studio – 3BR

SALES PRICE

MONTHLY RENT

BHD 130,000 – 650,000 per sq m 3BR – 6BR

BHD 600 – 2,500 3BR – 6BR

SALES PRICE

MONTHLY RENT

BHD 28,750 – 157,000 per sq m Studio – 3BR

BHD 250 – 1,350 Studio – 3BR

Apartment

Villa 19

Office Market Overview The trend of subdued market conditions in the sector has extended into 2020, primarily due to an oversupply of commercial spaces amidst a protracted economic slowdown. However, certain pockets have displayed signs of recovery with rents either holding steady or declining at a slower pace. Occupancy levels are improving but slightly, with landlords still vying for tenants.

Demand has been robust for small and medium size spaces given the proliferation of start-up companies in Bahrain who seek smaller and flexible office spaces. As of Q3 2019, Bahrain had 119 start-ups, recording growth of 46% over the past three years. High demand is witnessed for smaller fitted offices in the range of 100-150 sq m.

Unfavourable car park ratio to office spaces continues to be a challenge with many office schemes. However, developers are addressing these concerns in new schemes.

Whilst the main business districts are Seef, Bahrain Financial Harbour (BFH), Bahrain World Trade Center (BWTC) and Bahrain Bay, BWTC continues to be the prime office address attracting tenants who seek prestigious and landmark establishments to be their office addresses.

However, in case of the Diplomatic Area which was the former central business district, tenants prefer relocating to Seef due to favourable pricing, better quality space and ample parking.

Among the high-end Grade A office spaces is the upcoming mixed-use 27-storey tower by FEB Aqar, a wholly owned subsidiary of First Energy Bank. Located at Bahrain Financial Harbour, the tower will house offices, freehold residences and space for a large retail unit.

Similar to other markets, the pandemic will likely alter growth and expansion plans of companies in and outside Bahrain as they await certainty to emerge before making long-term property lease commitments.

MONTHLY OFFICE RENTS IN BAHRAIN

Seef District BHD 5.5 – 7 per sq m

Bahrain Bay BHD 5.5 – 7 per sq m

Diplomatic Area BHD 4 – 6 per sq m

Source: Cavendish Maxwell

20

2020 BAHRAIN PROPERTY MARKET REPORT

Tourism Overview Manama was named ‘Capital of Arab Tourism’ for 2020 in recognition of the country’s historical and tourism offerings.

In 2019, Bahrain recorded 12.5 million international arrivals. Between 2016 and 2019, the total number of international arrivals registered a CAGR of 0.5%, however, recorded a decline of 8% between 2018 and 2019.

Bahrain recorded 11.1 million inbound tourists in 2019. Between 2016 and 2019 the total number of inbound tourists registered a CAGR of 2.9% but declined 8.2% between 2018 and 2019.

For the first quarter of 2020, data from Bahrain Tourism and Exhibitions Authority (BTEA) displayed a decline of 45% in total arrivals from each of its representative offices compared to the same period in 2019. This leads to an average daily loss of 29,000 visitors and BHD 4 million.

According to government data for the last quarter of 2019, tourism for the purpose of shopping constituted the largest share of travel into Bahrain at 48%. This was followed by holiday/leisure at 28% and visits to family and friends at 12%.

In a bid to attract more international tourists, Bahrain slashed its fees on pre-entry visas, starting January 2020. Entry visas valid for one year would cost BHD 40 instead of BHD 85, whilst five-year valid entry visas would be charged BHD 60, down from BHD 170.

On 18 March, Bahrain suspended entry to the country without a letter of prior permission (except for diplomatic purposes) in a bid to contain the spread of COVID-19. The borders reopened for citizens and residents of the GCC as of 5 September and the 10-day quarantine period was waived with a negative polymerase chain reaction (PCR) test result.

The King Fahd Causeway linking Bahrain and Saudi Arabia was closed off in March as a precautionary measure and is expected to open on 1 Jan 2021. Renovation activities undertaken when commute was suspended over the initial months of the pandemic have helped increase the bridge’s passenger capacity by 45%. The link holds crucial importance to the tourism industries of both the Gulf nations.

TOTAL INTERNATIONAL ARRIVALS (MILLION)

TOTAL INBOUND TOURISM FLOWS (MILLION)

CAGR: 0.5%

CAGR: 2.9%

12.5

11.1 12

13.7 12.7

11.4

12.3

14

10.2

12

10

8

6

2016

2017

4 2018

2

0

2019

48% 2% 3% 7%

12%

2

4

6

8

10

12

14

Source: Information and eGovernment Authority

Shopping Holiday / Leisure Visiting Family and Friends

TRIPS BY MAIN PURPOSE Q4 2019

Business and Professional Healthcare 28%

Others Source: Information and eGovernment Authority

21

Hospitality Market Overview Before the onset of the pandemic, Bahrain’s hospitality sector was flourishing, with strong performance recorded in 2019.

Tourists from neighbouring Saudi Arabia, and business travellers from the GCC and beyond have been the key drivers of tourism in Bahrain.

Data from STR Global showed that in Q3 2019 in Manama, hotel occupancy grew 3.8% to 55.5%, ADR rose 0.2% to BHD 58.6 and RevPAR increased 4.1% to BHD 32.5 compared to the year ago. The absolute occupancy level was the highest for a third quarter in the capital since 2010. Also, last year, Manama recorded its first Q1 increase in RevPAR since 2014.

While travel and events were postponed in the first part of the year, movement restrictions have given way to effective social distancing health and safety measures that have made events such as the recent Formula 1 Grand Prix a success. Authorities are preparing for a resurgence when safety is restored with a slew of digital campaigns to promote tourism post COVID-19. The latest to be launched is the Ihnee Fee Al Bahrain (Here in Bahrain) that will coincide with the #WeWillMeet campaign to position Bahrain as a key tourist destination. With the upcoming exhibition centre in Sakhir, Bahrain is working to become the preferred location for meetings, incentives, conferences and exhibitions (MICE).

As of September 2019, Bahrain was on track to receive 15 million visitors a year by 2022. A number of hotel launches and renovations have been planned to accommodate visitors. Earlier in 2019, the Bahrain Tourism and Exhibitions Authority (BTEA) announced that 22 hotels were set to open in the kingdom by 2023.

UPCOMING HOTEL SUPPLY

Hilton Bahrain Bay Hotel & Residences Manama 210 2020

The Address Hotel Diyar Al-Muharraq 112

Staybridge Suites hotel Manama Al Seef 128 2020

Vida Hotel & Residences Marassi Al Bahrain 160

Bahrain Marina Shangri-La Hotel Manama 250 2022

Mama Shelter Manama 160 2020

Number of Keys 22

Expected completion year

2020 BAHRAIN PROPERTY MARKET REPORT

EXISTING LEISURE ATTRACTIONS Lost Paradise of Dilmun Water Park Adhari Park Gravity Indoor Skydiving Bahrain International Circuit Bahrain National Museum Dive Bahrain National Theatre of Bahrain

UPCOMING LEISURE ATTRACTIONS Marassi Galleria Retail and entertainment destination Diyar Al-Muharraq 13,200 sq m 2021

Avenues Mall Phase 2 Retail and entertainment destination The Avenues Company 38,000 sq m 2022

Harbour Row Retail Retail and entertainment destination GFH Financial Group 14,000 sq m 2020

Size

Opening Year 23

Retail Market Overview Retail has been a key contributor to Bahrain’s economy, mainly supported by the spending power of frequent visitors from Saudi Arabia who largely hail from the Eastern Province.

Despite being oversupplied, a number of major retail projects have either been announced or delivered recently and total approximately 300,000 sq m of combined gross leasable area. These projects offer unique concepts and differentiated features to compete with existing and older retail malls and emphasise a lifestyle or experience to attract patrons. These establishments have been designed keeping in mind the need to align with the rising popularity of e-commerce versus traditional retail. Most of the retail developments are either destination malls or retail strips (lifestyle neighbourhood centres).

Some of the big projects that have been announced for the kingdom include First Bahrain’s El Balcón open-air format mall with 4,111 sq m of leasable area and a total of 38 retail units of various sizes. Work is underway on the much anticipated Marassi Galleria Mall which is set to be complete by the first half of 2021. Apart from retail and dining options, it will feature a cinema, aquarium, virtual reality theme park, trampoline park, and other entertainment attractions. Construction is also set to begin on phase two of The Avenues – Bahrain, the kingdom’s first commercial and leisure mall which boasts a unique seafront extending over 1.5 km. The second phase of the waterfront project will add a leasable area of 38,000 sq m to the existing 39,000 sq m leasable area.

As tourism continues to drive retail in Bahrain, the sector will naturally face headwinds whilst travel remains restricted due to COVID-19 and until normal activity resumes.

To help retail players tide over the crisis, the Bahrain government has actively encouraged online businesses and has attempted to increase the share of online transactions. In April, the government launched mall.bh, a virtual mall to help local businesses sell their products online. The portal features over 100 brands and offers items including clothes, home products and electronics.

Seef Mall Marassi Galleria

Al Aali Mall Bahrain City Centre Moda Mall

The Avenues - Bahrain

Major Malls 24

Upcoming Malls

Dilmunia Mall

2020 BAHRAIN PROPERTY MARKET REPORT

25

26

2020 BAHRAIN PROPERTY MARKET REPORT

Industrial Market Overview Bahrain has two central free trade zones, Bahrain Logistics Zone (BLZ), Bahrain International Airport (BIA), an onshore zone called Bahrain International Investment Park (BIIP) and Investment Gateway Bahrain (IGB).

Measuring 1 sq km, BLZ is the only customs-free logistics park in Bahrain with bonded and non-bonded areas. BLZ has a tenancy lease price of BHD 4.14 per sq m per year and provides a 20-year renewable land lease for plots starting from 4,000 sq m.

Within BIIP, Baytik Industrial Oasis (BIO) features pre-built 2,000—9,500 sq m units available for monthly rent of BHD 2.49 per sq m and 25-year renewable leases. While BIIP is ideal for large manufacturing operations, BIA, which is spread over 19,000 sq m, specialises in cargo sales, trans-shipments, breakbulk cargo handling and customs clearance.

In terms of new entrants, Asia-headquartered Kerry Logistics launched a new office in Bahrain to expand its presence in the region. The new office will cater to the automotive, oil and gas, electronics and technology, and fashion and lifestyle verticals with air, sea and road freight, customs clearance and warehousing services.

Certain policy measures by the government in the space have been directed at attracting foreign investment into Bahrain. Last year, the government announced that foreign companies would be allowed to own 100% of oil and gas extraction projects. To be eligible, the foreign parent company must have signed, or be in the final stages of signing, an exploration and production agreement with Bahrain.

BAHRAIN’S FREE TRADE ZONES

Bahrain International Airport (BIA)

Bahrain International Investment Park (BIIP)

Bahrain Logistics Zone (BLZ)

27

A Word From Our

Chief Economist

Julian roche Chief economist

At a time when investors are focused on governance, an exemplary response to COVID-19, including stringent screening and testing procedures, effective management of international travel, prompt lockdowns, and targeted fiscal measures have seen Bahrain manage the crisis as efficiently as its larger neighbours, and maintain both economic and political confidence. Infrastructure projects have not been reduced in scope, and there continues to be no medium-term threat either to the currency peg or to the government’s hard-won political achievements.

There are undoubtedly significant economic challenges, but they are being met. It was inevitable that continued subdued oil prices would weigh on both the budget deficit and government debt, but as of August 2020, the government can feel justified in its policies: all three major credit agencies are settled on a ‘stable’ ratings outlook, albeit currently at B+/B2. Room for improvement, certainly, and cautious, given oil prices above their March 2020 trough – but along with other GCC countries, a far less threatening macroeconomic picture than the evolving debt spiral of Organisation for Economic Cooperation and Development (OECD) countries. Focus Economics analysts project the economy to contract 3.9% in 2020, S&P Global Ratings expects around 5%, but both agree with the Economist Intelligence Unit (EIU) that there will be expansion in 20211, performance which, if realised, would significantly exceed that of OECD countries. The combination of a BHD 4.3 billion stimulus programme and tax forbearance during 2020 has been expensive—Bahrain’s state budget deficit may reach Fitch Ratings’ forecast of 15.5% this year. But any figure under 20% this year should undoubtedly be counted as a success, and Fitch projects the deficit to narrow to 5.3% by 20222. Debt-to-GDP ratio stands at above 110%: no cause for celebration, but not a threat to financial stability, nor on an inexorable trajectory of growth.

Investors can also rely on a further extension of credit from fellow GCC countries to ameliorate any short-term problems, an advantage of strategic importance combined with proximity to larger friends. If the fiscal reforms encouraged by the World Bank earlier in 20203 are implemented in the medium term, the resultant economic diversification, amidst even a level oil price, provides a backstop against any significant deterioration in macroeconomic variables.

The real estate market has tracked this evolving macroeconomic picture. Oversupply in some areas and sectors has been balanced by stable, even slightly rising, rents and prices in others.

Bahrain’s real estate market has outperformed many major investment destinations this year: the advantage of a market driven by fundamentals which have shown improvement since early this year, and investors who have been committed for the long-term. If the expectations of economists worldwide are realised, and the real estate market continues to track the economy closely, a revival in market conditions in Bahrain is a plausible central forecasting scenario.

1 2

Focus Economics (2020) Bahrain Economic Outlook. July 2020. https://www.focus-economics.com/countries/bahrain Fitch Ratings (2020) Fitch Downgrades Bahrain to ‘B+’; Outlook Stable. https://www.fitchratings.com/research/sovereigns/fitch-downgrades-bahrain-

to-b-outlook-stable-14-08-2020 3

World Bank (2020) Bahrain’s Economic Update — April 2020. https://www.worldbank.org/en/country/gcc/publication/bahrain-economic-update-april-

2020#:~:text=Overall%20growth%20is%20projected%20to,measures%20and%20tapering%20megaproject%20investments.&text=Fiscal%2 consolidation%20 under%20the%20FBP,of%20GDP%20in%202019%2D2020.

28

2020 BAHRAIN PROPERTY MARKET REPORT

Strategic Consulting And Research Cavendish Maxwell’s Strategic Consulting and Research team has some of the region’s most highly qualified data analysts with a wealth of international real estate advisory experience. We work closely with a broad portfolio of banks, property developers, government entities and private clients, providing authoritative, industry-specific research and advice to maximise portfolio performance.

40

BANKS

Our documents and advice meet banking and audit criteria, proven by our presence on over 40 bank panels across the Middle East.

Our strategic consulting and research expertise spans a variety of sectors including residential, office, retail, hospitality, healthcare, education and mixed-use developments, and our team draws on reliable proprietary data to allow for thorough and accurate analysis of trends and market fluctuations.

Key Services Commercial Valuation Residential Valuation Commercial Agency Investment Advisory Machinery and Business Assets Valuation Building Consultancy Project Management Strategic Consulting and Research Property Monitor

Sectors Capital Markets Development Land Education Healthcare Hotels, Hospitality and Leisure Industrial and Logistics Offices Residential Retail

29

Aditi Gouri Head of Strategic Consulting and Research T: +971 50 321 1781 E: aditi.gouri@cavendishmaxwell.com

Dubai 2205 Marina Plaza, Dubai Marina, P.O. Box 118624, Dubai, United Arab Emirates T: +971 4 453 9525 E: info@cavendishmaxwell.com

Sharjah 1801 Sarh Al Emarat Tower, Buhaira Corniche Street, P.O. Box 38583, Sharjah, United Arab Emirates T: +971 6 715 0444 E: info@cavendishmaxwell.com

Abu Dhabi 605 West Tower, Abu Dhabi Mall, Tourist Club Area, P.O. Box 126609, Abu Dhabi, United Arab Emirates T: +971 2 448 4677 E: info@cavendishmaxwell.com Â

Manama Office 906, Floor 9, West Tower, Bahrain World Trade Centre, P.O. Box 1829, Manama, Kingdom of Bahrain T: +973 1616 1448 E: info@cavendishmaxwell.com

Muscat Villa 836, Way 3012, Al Sarooj, P.O. Box 3438, Muscat Sultanate of Oman T: +968 99 44 5917 E: info@cavendishmaxwell.com

Disclaimer: The information and analysis contained in this report is based on information from a variety of sources generally regarded to be reliable, and assumptions which are considered reasonable, and which was current at the time of undertaking market research, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons.

The report and analysis do not purport to represent a formal valuation of any property interest and must not be construed as such. Such analyses, including forward-looking statements are opinions and estimates only, and are based on a wide range of variables which may not be capable of being determined with accuracy. Variation in any one of these indicators can have a material impact on the analysis and we draw your attention to this.

Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this report.

30

cavendishmaxwell.com