DTZ, one of the top global real estate services firms, released its latest update on Qatar’s real estate market.
The report predicts a positive outlook as a result of demand for all types of real estate. Mark Proudley, author of the report and Associate Director at DTZ, commented;
“Demand can be attributed to Qatar’s strong economic performance – driven by high energy prices and the Government’s investment plans as part of the Qatar National Development Strategy 2011 – 2016 and in preparation for FIFA 2022 World Cup which is expected to reach US$ 64 billion between now and the event.”
Other key highlights of the report include:
The office market
The levels of oversupply in Doha’s office market that were being witnessed in 2011 are eroding due to increased demand. This demand is primarily being driven by large Government and financial bodies but also from the construction and engineering sector – which could be attributed to 2022 World Cup related activity.
According to DTZ’s report, total current office stock in Doha is estimated at 3.7 million sq m, 1.43 million sq m of which is situated in the Diplomatic District. There is approximately 248,000 sq m of space currently being marketed as available to lease in the Diplomatic District and this level of supply will continue to grow over the next 24 months, albeit at a reduced rate in comparison to the previous two years.
Increased demand for prime office space has stabilised rents across all main commercial districts throughout the first quarter of the year. Large space users seeking in excess of 5,000 sq m, can secure rates as low as QR 145 per sq m per month. For those looking for space less than 500 sq m, rental rates of QAR 275 per sq m per month have been achieved. DTZ forecasts that rental rates will remain relatively stable over 2012 with the possibility of increases towards the end of the year.
The residential market
The increase in population, due to recruitment of personnel from outside of Qatar by new and expanding businesses, continues to drive demand for residential accommodation.
The supply pipeline is being dominated by luxury apartments. Total stock of luxury apartments was 8,500 at the end of 2010, increasing to 9,750 at the end of 2011 and DTZ forecasts this figure will reach 16,250 by the end of 2012. This equates to a 66% increase in the total stock of luxury apartments. This supply of apartments is focused around the Diplomatic District and on The Pearl where occupation rates are, on average, 95%. The impact of high occupancy rates has seen a gradual uplift in the average monthly rental rates. In particular, for one bedroom apartments where demand is strong and supply is limited.
Average rental rates achieved on The Pearl at the end of Q1 2012 for a three bedroom apartment were QAR 17,000, QAR 13,500 for a two bedroom apartment and QAR 11,000 for a one bedroom apartment.
Residential sales at The Pearl continue to dominate the freehold market as it is now an established and successful residential location.
During the second half of 2011, DTZ’s report notes evidence of improved sales activity and greater optimism from potential purchasers/investors. This trend continued into the first quarter of 2012. A key factor in this trend was the 60% salary increase awarded to Qatari employees in the public sector which has increased the number of prospective investors with access to funds. Average sales rates are currently in the region of QAR 11,000 – 13,000 per sq m on The Pearl.
The retail market
Qatar’s retail market remains stable with limited activity over the first quarter of 2012. The latest figures available estimate that the retail trade in Qatar accounted for QAR 32.2 billion over 2010, up by 8.3% on 2009.
The retail accommodation offer in Qatar is divided between organised retail malls, high street showroom space and souq retail. Total organised retail mall stock in Doha increased from 430,000 sq m at the end of 2010 to approximately 509,000 sq m of GLA, distributed across 10 main shopping malls, at the end of 2011. Total stock of retail mall accommodation is expected to reach 684,000 sq m by the end of 2012 with new malls scheduled to open including Ezdan, Markhiya and Gulf Mall.
Qatar currently provides 300 sq m of organised retail accommodation per 1,000 people – in comparison to most European countries which provide an average of 200 sq m per 1,000 people. Dubai has the highest ratio at 1,400 sq m per 1,000 people.
The majority of retail mall space is fully occupied with waiting lists at the major malls. Landmark and Villaggio shopping malls command the highest rental rates due to their location and popularity. Rentals range from QAR 225 to QAR 250 per sq m per month for standard line units.
The hotel market
The hotel industry has witnessed significant capital investment and growth in recent years as tourism development plans are implemented to diversify and expand the local economy. Qatar Tourism Authority (QTA) is planning to invest US$ 20 billion on tourism infrastructure in advance of the 2022 FIFA World Cup.
DTZ recorded five new hotels opening over Q1 2012. High profile openings included the St Regis and Intercontinental Doha City Hotel.
The number of hotels in Doha increased from 79 at the end of 2011, up to 84 by the end of March 2012. According to QTA, a further 77 hotels are planned or under construction and will add a further 17,000 rooms to the current stock.
Over the first quarter of 2012, occupancy rates were recorded at 63% in comparison to 77% over the same period in 2011. Average Room Rates (ARR) fell 7.6% from US$ 281 to 261 and Room Yields reduced by 24% from US$ 217 to 165. These reductions are partially explained by the increases in hotel supply but it is also worth noting that the AFC Asian Cup was hosted in Doha in January 2011, which impacted on demand over the first quarter of 2011.