Colliers International releases its comprehensive Qatar Real Estate Overview Q2 2014
Colliers International released its comprehensive Qatar Real Estate Overview Q2 2014. The report, providing a brief snapshot of the residential, retail and office segments, highlights the key factors impacting the market and its future outlook.
Given Qatar’s National Vision 2030 to become a global hub for culture and heritage, a number of significant tourism, real estate and cultural projects are scheduled to break ground or have already commenced. This, in addition to major infrastructure projects such as the new Hamad Airport, are contributing to the country’s global profile and strong market performance that witnessed a 29% increase in the number of real estate transactions (Q4 2013 vs Q1 2014) and growth in value of real estate sales by 35% (Q4 2013 vs. Q1 2014).
Commenting on the report, Ian Albert, Regional Director of Colliers International, said, “Doha remains an upbeat market that is expanding in terms of overall offering while also bringing depth to the market. The residential sector is a significantly undersupplied market that represents strong potential, particularly for units in proximity to social infrastructure facilities. Our research indicates signs of a potential oversupply in the office and retail sectors, however, within the office sector, demand is still growing for premium grade space. We also see a balance to the current projected retail oversupply coming into place as Qatar progresses with its initiatives to establish its position on the world tourism market.”
Sustained economic development, population growth and a decreasing average household size have been recorded are contributing to the demand for residential units in Doha. According to the Qatar Real Estate Overview, despite the 22,000 units expected to be released over the next five years, Doha’s residential market will remain significantly under supplied.
Colliers International estimates that total office demand in Doha will reach 2.2 million m² by the end of 2014. Given projected growth in white collar employment, this figure is expected to reach 3.4 million m² by 2018. With demand not expected to match the growth in supply, a stabilisation of rentals within primary grade offices has been witnessed as tenants relocate to central more desirable areas as rents become more affordable.
Despite being an oversupplied sector, there is an increasing demand for Grade A (in terms of location) office space. There is also a limited supply of smaller offices ranging from 200 to 500 m² as the floor plates in a number of available buildings are targeted at larger occupiers.
“Efforts to address the demand-supply dynamic are indicators of a maturing real estate market and it is interesting to see how the real estate value chain is responding,” continued Albert, “To remain competitive some landlords and developers are adopting flexibility of both product and leasing terms.”
The report also highlights the potential for increased competition in the retail sector with an estimated delivery of 900,000 m² scheduled to be released over the next five years. Despite this increase in supply, given the annual footfall of 49 million across seven key malls in Doha, and the scope to further develop the food & beverage offering in the malls, demand could grow for destination shopping malls.
Albert concluded, “With over 79% of the population in Qatar consisting of Gen X &Y the opportunity exists for malls to reposition themselves as lifestyle destinations offering visitors unique and innovative entertainment and an increased range of food & beverage formats. New developments also have an opportunity to incorporate lifestyle components to their designs and mix to cater for new customer expectations. We have seen similar concepts do very well around the region and the same can be applied to Doha. There is always room for something different in the market, as long as it is at the right price.”
Key Report Findings:
•Residential supply in Doha totalled 122,000 units by the end of 2013. the majority of existing housing units are composed of apartments whilst villas comprises only 29% of the total housing units
•Rental rates across apartments in Doha witnessed a decline during the 2008 – 2012 Average rentals in 2014 have witnessed a 4% increase an average of QAR 725 per m² p.a. in 2013.
•Since 2008, residential sales prices have also witnessed a substantial drop, but 2012 witnessed positive signs similar to the rental market. Average prices in 2014 increased by 4% from the previous year
•Grade A (in terms of location) office space reached 2.5 million m² by the end of 2013
•Applying the average benchmark as recommended by the Royal Institution of Chartered of Surveyors – RICS (i.e. 11 m²) to the current number of office employees in Doha, Colliers estimates total demand at 2.2 million m² by the end of 2014
•Overall, office rental rates across Doha witnessed a substantial drop since 2008, however, the rental rates are now stabilising and witnessed little or no change in 2014, from the previous year.
•Office occupancy rates across Doha are currently 75%, with newer buildings taking longer to lease
•Total existing supply in terms of Gross Leasable Area (GLA) currently stands at approximately 629,000 m². Doha City Centre accounts for 20% of this supply, followed by Villagio, at 17% and Porto Arabia representing 15% of cumulative supply
•Based on future population growth estimates demand for shopping mall space is likely to continue an upward trend. Colliers International estimates a delivery of a further 900,000 m² within the next 5 years
•17% of Mall Tenants in Doha are F&B, Compared to that of a 20%+ of F&B Units in Shopping Malls Across Dubai
•Average line shop rentals in shopping malls in Doha range between QR 180 and QR 275 per m² per month.
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