DTZ report assesses the impact of Qatar’s government spending review on Qatar’s real estate market in the past six months
Doha, Qatar; 14 October 2015: DTZ Qatar released its Q3 2015 market report today. The report highlights the impact that the government’s revisions of its spending plans has had on Qatar’s real estate market in the past six months, particularly the commercial and prime residential markets.
The most significant findings include:
- There has been an increase in vacancies in the prime residential market due to recent redundancies in the oil and gas sector.
- Despite these increases, rents in this sector have remained strong in Q2 and Q3. This is primarily due to an increase in population. The population of Qatar reached 2.37 million in May 2015, representing an increase of 9.2% since May 2014 due to steady job growth in non-hydrocarbon sectors such as finance, hotels, restaurants, and trade and transport.
- The commercial sector has witnessed a reduction of new office acquisitions from the public sector. Typically the public sector accounts for 60% of office leasing in Doha’s West Bay area.
- Most of the Q2 and Q3 activity has been limited to transactions of less than 250 m². There have been no commercial leases in excess of 3,000 m² agreed in Q3.
- There is currently 1.7 million m² of purpose built office space in the West Bay area. This represents about 40% of the supply.
Johnny Archer, Associate Director, Consultancy and Research, DTZ, stated:
“Declining oil and gas prices have resulted in a review of the budgets in many government departments and in the oil and gas sector; however, the government has recently confirmed that spending on infrastructural projects will proceed as planned. The key concern in the residential sector is rental inflation where new supply of accommodation for the middle income families has struggled to meet the demand of an increasing population. There has been an increase in vacancies in the prime residential market in recent months; however, with non-hydrocarbon sectors experiencing double-digit growth, occupancy levels are likely to recover over the next six months.”
Kenneth Corbin, Head of Commercial Agency, DTZ Qatar added:
“Whilst the residential market is showing signs of resilience during this period of Government review, the commercial sector is likely to be challenging in the near term as Landlords look to the private sector to fill the temporary void in Government take up. In our opinion, those Landlords offering the most flexibility in lease terms will reap the greatest benefits. Additionally, with an excess of 300,000 sqm of office space expected to be released to the market in the next 12 months in West Bay and Lusail, occupiers will be presented with an opportunity to improve the standard of their existing space and / or improve their current lease terms.”
In the hospitality market, DTZ expects occupancy levels to come under pressure due to the 4,000 new hotel rooms that will be available in the market from 2016. The supply of hotels will increase further in the medium term as preparations for Qatar’s FIFA World Cup 2022 continue. A total of 11 new hotels have opened in 2015 adding around 1,400 rooms to the sector.
More than 1.3 million additional square metres of retail space in 12 new shopping malls is currently under development and may be handed over by 2019 according to DTZ Qatar’s report. This translates into a 220% increase on the current supply, which will have a major impact on the retail market. Currently there is a strong demand from retailers and high occupancy levels and there is an increase in rental levels of lease renewals at busier shopping malls.
Concluding, Edd Brookes, General Manager, DTZ Qatar, stated:
“Despite the softening of oil prices which were a feature of the market during the last two previous quarters, and of which there has been some growth of late, the Qatari market continues to provide both landlords and occupiers with significant opportunities. In particular, robust population growth forecasts together with very positive infrastructure deployment reinforces our view that Qatar economic growth ambitions remain highly positive despite budget revisions in the public sector.”