DTZ Quarterly Report Qatar Q1 2018: Office Market Overview
There has been limited new demand for prime office in West Bay and Lusail in Q1, with activity largely limited to relocations and downsizing of existing space.
Despite signs of increased activity for start ups looking for small business units over the past 12 months, this has largely been restricted to less expensive suburban locations and has not, as yet, translated into demand for corporate office accommodation.
The merger of Ras Gas and Qatar Gas consoliated their operations in Palm Tower in West Bay, with Qatar Petroleum occupying the accommodation vacated by Qatar Gas in Navigation Tower. Otherwise, demand for new offices from the hydrocarbon sector remains subdued due to fiscal consolidation measures first introduced in 2015 and 2016.
Recent inactivity in the market has resulted in increasingly generous incentives being offered to tenants who are looking for new premises. Rent free periods of two to three months have been commonplace over the past 18 months, however in some cases rent free periods in excess of six months are now available, depending on the length of the lease.
One of the main barriers to office re-locations for small to medium sized companies in the private sector is the cost associated with moving. The capital exoenditure of fitting out an office from shell-and-core is often prohibitive, not least due to the uncertain economic climate. As competition increases between buildings, there has been an emerging trend in Q1 of landlords offering tenants turn-key offices fitted to their specification.
Overall office supply in West Bay remains at approximately 1.65 million sq m. A further 210,000 sq m is now either occupied or available to lease in Lusail, between Energy City and the Marina District. Overall commercial office supply in Doha is estimated to be in excess of 4.2 million sq m.
DTZ estimates that there is approximately 350,000 sq m of Grade A accommodation available to lease in West Bay and Lusail, which represents approximately 19% of total supply in these districts.
Prime headline rents in West Bay of QAR200 per sq m per month are still being achieved for units of less than 250 sq m in prime towers, however rents for larger suites and full floors currently range from QAR120 to QAR170 per sq m per month.
Offices in areas such as Old Salata, Al Sadd, and Airport Road, now command headline rents of between QAR70 and QAR120 per sq m per month, depending on size, quality, fit-out and location.
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