Prime office space rents discounted in Manama

Bahrain Financial Harbour is having a hard time attracting and keeping tenants. Razan Alzayani / The National

The price of prime office space in Bahrain has dropped by a third in the past three years as hundreds of new buildings are opening at a time of financial and political uncertainty.

Half of prime office space in the kingdom is empty, according to estimates from CBRE, the property company, and some landlords are finding it impossible to sign up tenants.

During the first quarter of this year, monthly leasing rates for class A office space fell to 8 dinars (Dh77) per square metre, compared with more than 12 dinars per sq metre during the same period in 2009, CBRE estimates.

Nowhere is the emptiness more apparent than in Bahrain Financial Harbour, which was aimed at bringing world-class office space to Manama.

But five years after opening, the location struggles to keep tenants from deserting, said Mike Williams, a senior director at CBRE.

"It targeted the financial services sector, which has collapsed globally as well as in Bahrain," he said. "It was the wrong product. It wasn't what this market wanted."

Bahrain Financial Harbour opened in 2007, initially billed as a rival to the Dubai International Financial Centre, which began operating in 2004.

But just 78 companies are listed as tenants in Bahrain Financial Harbour's directory, including retail outlets and other services. Some of those listed have shut down.

That compares with 848 firms housed in the DIFC at the end of last year.

A multi-storey retail space beneath the two towers is a ghost town, with a few branches of Caribou Coffee and Costa Coffee sparsely populated. A Starbucks cafe and a Jashanmal bookstore had shut down.

In terms of actual occupancy, the towers could be as low as 25 per cent, Mr Williams said.

Representatives of Bahrain Financial Harbour did not respond to requests for comment.

The nearby World Trade Center towers have fared better, with a luxury mall beneath occupied high-end brands such as Cartier and De Beers.

However, both units have still faced difficulty attracting tenants, as tens of thousands of job cuts fell across the banking sector as a result of the global financial crisis.

The central bank issued licences for 14 new financial services firms since the beginning of last year, taking the current total to 415.

But recent political unrest in the kingdom has coincided with a number of financial services firms, including Société Générale and Crédit Agricole, redeploying staff to Dubai in an effort to cut costs.

On Wednesday, Reuters reported that Bank of Tokyo-Mitsubishi UFJ was seeking to move most of its 60 staff from Bahrain Financial Harbour to Dubai, citing security concerns.

Even when new tenants are found, they demand fully fitted interiors, according to the property consultancy Cluttons. A new office space without fittings is "almost impossible to lease, with very few tenants willing to commit to the initial cost of fitting out the space either due to a lack of funds or uncertainty as to where their business will be in the next one or two years," Cluttons said in a recent report.

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