Posted on August 11, 2016

Qatar’s leading global real estate company, DTZ, released its Q2 2016 Qatar market report. Among many findings, DTZ’s research team identified reduction in Grade A office rents of between 10% and 15% since the start of the year with the majority of enquiries being for space of less than 250sqm. Office supply in West Bay currently stands at almost 1.7m sq. m, with approximately 0.25m sq. m currently available to lease. By 2017 it is estimated that a further 385,000 sqm will be added to the Grade A office market.

Vacancy rates of Grade A office accommodation in West Bay have increased by approximately 5% over the last six months, resulting in opportunities for tenants with lease events to negotiate advantageous terms. While the population of Qatar increased by some 9% over the past 12 months, the vast majority of new arrivals have been made up of construction workers. While this has kept the tertiary sector buoyant, demand for prime and mid-range residential accommodation has fallen due to a significant exodus of white collar workers following recent redundancy programmes in the government and hydrocarbon sectors.

Prime residential apartment rents have typically fallen by between 5% and 10% within the past year. Rent’s for mid-range units did not experience the same discounts in rent, however it is anticipated that rents may soften in Q3 as new supply comes to the market in areas such as Bin Mahmoud and Al Mansoura. Prime residential apartment supply is also expected to increase significantly over the coming year, with more than 3,000 new units nearing completion in West Bay, and The Pearl-Qatar.  It is likely that new supply will see rents continue to soften, reversing the trend of high increases experienced between 2011 and 2015.

DTZ Qatar’s research Fall in office 2 [qatarisbooming.com].jpg

There has been a continued fall in demand for corporate residential lettings for apartment blocks and compounds with more companies now preferring to provide rental allowances rather than paying for employee accommodation. In the hospitality sector, almost 5,000 hotel keys have been added to Qatar’s stock over the past 18 months. This additional supply started to impact on performance measures in Q2. Occupancy levels in April reduced to 64% in April 2016 compared to 72% in the same month in 2015. Average daily rates also experienced a year on year fall of 6.5%. Whilst there has been an increase in the number of tourists, Saudi Arabia remains the dominant market which contributes to 42% of the tourist market.

Commenting on the findings of DTZ’s latest report, Mark Proudley, Director, Consultancy and Research, DTZ, stated: The current rental softening reflects market driven supply and demand and provides some relief to occupiers from rents which have been rising year on year since 2010. The long-term trajectory for Qatar remains good with the government’s significant infrastructure investment, valued at QAR261bn (US$71.68 bn), providing welcome and fundamental support to the wider RE economy.  Furthermore, for the hospitality sector, the Qatar National Tourism Sector Strategy Plan 2030 has earmarked US$45bn for tourism projects over the coming 15 years and as FIFA 2022 gets closer I am confident that Qatar’s RE market will start to feel some of the positive effects of this spending. ”  

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