Office supply to reach 6mn sqm by 2022, says DTZ-Qatar
Qatar is expected to see the overall office supply reach 6mn sqm by 2022 and the new sovereign initiatives to expand the private sector, including the introduction of the 100% foreign ownership law, which will likely create demand for small office suites and serviced accommodation, according to DTZ Qatar, a realty service firm.
Moreover, in the residential side, the greatest demand is expected to be for good quality ‘mid-range’ apartments in the next five years, it said.
On the office market, DTZ said it expects overall the office supply to reach 6mn sqm by 2022. While the majority of upcoming office supply will be concentrated in Lusail Marina District, the Qatar Petroleum District in West Bay is expected to open within the next 18 months and will provide an additional 230,000 sqm, of Grade A accommodation.
New premium accommodation has recently been released in Msheireb. On completion, the project will provide more than 200,000 sqm of office space, which will partially be occupied by the Emiri Diwan.
The supply of prime office accommodation continued to grow in fourth quarter (Q4) of 2018, as buildings in Lusail’s Marina District arrived to market. Overall supply of Grade A office accommodation in West Bay and Lusail has now topped 2mn sqm, while overall supply of office accommodation in Doha is in excess of 4mn sqm.
Despite the expected demand for small offices and suites, it is unlikely that sufficient demand will be created in the short term to replace the demand previously generated by the public and hydrocarbon sectors, leading to apprehensions of increasing vacancy rates in the office market, according to DTZ.
The increasing supply, coupled with lower demand has resulted in rental levels falling by about 25% since 2015. Small, fitted office suites of less than 200 sqm m in West Bay can still command in the region of QR180 per sqm per month. However larger floor-plates are now available to lease for between QR120 and QR150 per sqm m per month.
Offices in areas such as Al Saad, Old Salata and C-Ring Road are now available at monthly rents of between QR80 and QR100 per sqm, depending on size, quality, fit-out and location.
There have been few lease agreements of note in the Q4 of 2018 in the prime office market. Most activity has revolved around startups and small and medium enterprises, it said.
“This demand is primarily focused on flexible serviced accommodation, or small inexpensive units in secondary locations, rather than the larger corporate office suites on offer in West Bay,” DTZ noted.
Due to the amount of available accommodation on the market, rent-free periods of between two and three months are now commonplace for new leases. Some tenants are also seeing their rents fall on renewal of their leases to current market levels, rather than the inflated rents that had been agreed between 2013 and 2015.
On the residential market, DTZ found that leasing activity has increased for prime apartments in recent months as it is largely generated by residents looking to relocate within Qatar and ‘trade-up’ to take advantage of more attractive lease terms.
The relative lack of new demand being generated remains a concern as vacancy rates are expected to increase with the completion of new apartment developments, it said.
Article Link: Gulf Times