With the World Cup firmly in the county’s sights, Qatar’s real estate industry has a positive future ahead. The island nation has one of the fastest growing economies in the world and although it was affected by the global economic crisis, the country experienced a GDP growth of 9% during 2009 and owes much of its stability to its expanding energy sector.
Building the necessary infrastructure and real estate is now a top priority, in addition to the development of three high-tech stadiums. Mark Proudley, associate director at DTZ Qatar and author of Qatar Q1 2011, says the county’s successful world cup bid will ‘act as a catalyst for significant Government investment into infrastructure and real estate development.’
“That will not only enhance the real estate offering in Qatar but also give it a significant boost – creating employment, population growth and generating strong demand for all real estate assets over the medium term.”
The residential market
Both DTZ and Asteco Property Management point out a growing trend of stablisation across the residential market. According to Asteco, Qatar has seen a continued stabilisation of demand in the residential apartment market since the last half of 2010. Of late, better quality apartments have become more affordable while low-end properties have started to suffer.
“Continued delivery of new stock on the Pearl-Qatar has seen rental rates decline as supply continues to outstrip demand. Villa rentals have begun to show signs of stabilisation, with few price movements overall,” the Asteco report says.
Researchers at DTZ say demand for residential property has shown signs of improvement over the second half of 2010 and Q1 2011. “This can be attributed to increased economic activity which is creating new jobs and attracting people to Qatar seeking employment. As a result, rental rates are showing signs of stabilising in response to increased demand.”
DTZ revealed tenants renting a prime residential property in locations such as Lagoon Plaza and The Pearl range, can expect to pay from QR 8,500 – QR 14,000 ($2,300 - $3,800) per month for a two bed apartment, depending on location and quality. DTZ expects rental levels to continue to stabilise over 2011.
Asteco recorded a ‘widening’ of the pricing range for apartments at The Pearl-Qatar. “This demonstrates the growing maturity of the market, where purchasers place greater emphasis on quality, unit sizes, views and amenities, and are prepared to pay a premium for better quality.
“Poorer quality apartments at The Pearl-Qatar saw a marginal decline as part of this price widening, but encouragingly, some superior quality apartments saw a slight increase. This is the first sign of growth since late 2008, and Q2 2011 results will indicate if this will be an on-going trend.”
DTZ noted that compound villas started to see a decline in rent prices due to oversupply in the market but the decreases were on average, less than 10% and have shown indications of stabilising since mid 2010.
Asteco’s report highlighted a ‘limited change’ in villa rentals which the property management company said ‘could be a sign of stabilisation in this sub-market.’ The only noticeable drop in rental rates was for four bedroom villas located in Al Hilal, where the lowest range dropped from QAR 10,500 ($2,800) to QAR 9,500 ($2,600).
DTZ’s report states: “In comparative terms, large stand alone, high-end villas have performed better with rates for good quality stock stabilising due to restricted availability. Rentals start at QR 23,000 ($6,300) rising up to QR 45,000 ($12,300) per month.”
Advisors at DTZ noted residential sales at The Pearl were dominating the freehold market. Average apartment sales prices peaked at rates of QR 18,000 – QR 21,000 ($4,900 - $5,700) per square metre in Q2 2008. DTZ, says the knock on effects of the global economic crisis and delays in handovers, resulted in lower market confidence among property investors with stricter bank lending requirements discouraging prospective investors.
“These factors resulted in a difference between the price expectations of vendors and purchasers. There is a positive outlook for the freehold market in 2011 with signs that investor confidence is returning. This has been boosted further by Qatar’s successful World Cup bid. DTZ expect that Doha will continue to experience relatively strong residential demand over the short to medium term as the economy remains buoyant and the population growth continues,” the report said.
Office market
Currently experiencing an oversupply, according to DTZ’s report, total current office stock in Doha is estimated at 3.4 million square metres of which 50% is considered Grade A stock. The CBD accounts for just over 70% of the current Grade A stock. Increased demand for prime office space has stabilised rents which has been witnessed in the latter half of 2010 and first quarter of 2011. Rents have traditionally been higher in the Diplomatic District, than in other office locations in Doha with rates peaking by mid-2008 at QR 310 ($85) per sq m/month.
“Prime rates in the Diplomatic District over 2010 have stabilised at around QR 230 ($63) per sq m/month; however it is possible to secure secondary accommodation from rates as low as QR 140 ($38) per sq m/month. Small suites of less than 500 sq m in size are still at a premium and in good quality accommodation, rates of QR 250 – 270 ($68 - $74) per sq m/month have been achieved.”
Both Asteco and DTZ point out there’s now slightly more demand for office space. DTZ recorded renewed occupier confidence in 2010 with registered demand increasing by 62% compared to 2009. Similarly, the first quarter of 2011 indicates continued optimism with 18 new companies registering requirements totaling over 50,000 sq m. DTZ says this demand has been led by Government sector activity. According to Asteco, there has been a marginal increase in office demand, particularly for smaller suites.
Asteco’s report states: “However, the continued delivery of new and second-hand stock to the market has discounted any positive effect on overall rental rates. Overall, there was little change in residential leasing rates from Q4 2010, highlighting a continued stabilisation of demand in the residential apartment market.”
Looking ahead
Asteco highlights a number of key infrastructure and development projects likely to fuel growth in the real estate market. The Government is driving the development of major Infrastructure projects within Doha and across other smaller cities in accordance with the 2022 bid and the wider ‘2030 Vision’.
One of the major developments is the Qatar Railway Network; it is predicted this will trigger additional development around the numerous communication hubs.
Qatar Railways Development Company plans to build a local transport system for the purpose of integrating Qatar’s various planned railways into a comprehensive and consolidated national railway system. The project is part of the Government’s plan to connect Qatar to other GCC countries.
Significant plans include: A high-speed link between the New Doha International Airport, Doha City Centre, and Kingdom of Bahrain via the Qatar-Bahrain Causeway. A freight rail link based on the GCC rail and Doha expressway studies. Doha Metro Network based on the Qatar Transport Master Plan and Light rail and Automated People Mover networks located in Lusail, Education City and West Bay.
The Asteco report states: “These projects, particularly the infrastructure developments, will change the landscape of the real estate market in Qatar, and the arrival of new work forces and managers to complete these projects will have a positive impact on the residential and office market.”
“At present, the hotel and short-term leasing markets are benefiting from an influx of business travellers who are finalising contracts or discussing opportunities. Asteco believes that once employers begin to deploy their full-time work forces to Qatar, the residential and commercial long-term leasing markets will witness increased activity. The residential sales market is also likely to benefit from employers and individuals on long-term contracts seeking to avoid lengthy rental costs.”
The report concludes: “The overall outlook for Qatar is very positive, but Government entities and developers will need to pay close attention to ‘phasing’ of residential and commercial developments in order to allow demand to match supply.”
The hospitality and retail market
The country’s successful bid to host the 2022 World Cup, is set to have a significant impact on the future supply of hotel accommodation. Qatar’s bid team pledged to make 240 hotels available during the tournament, offering in excess of 84,000 rooms.
According to DTZ’s report, the number of hotels in Qatar continued to expand over 2010. QTA reported that 66 hotels were operating by the end of 2010 in comparison to the 58 hotels at the end of 2009 and 51 at the end of 2008. The total number of rooms available reached 9,574 by the end of 2010, an increase of 12.7% from the 8,495 rooms available at the end of 2009. In comparison, the total number of rooms increased over 2009 from 6,750 to 8,495.
Looking at the retail market, DTZ’s report states retail stock is dominated by large-scale retail developments which extend to approximately 580,000 sq m of GLA across eight main retail schemes. Before the end of 2012, DTZ estimates, there is potentially an additional 197,000 square metres of such retail stock coming onto the market, which will equate to a 34% increase in supply.
The DTZ report states: “Retail rental levels have remained stable as most existing malls boast full occupancy with waiting lists of potential tenants. Landmark, City Centre and Villaggio shopping malls command the highest average rental rates ranging from QR 180 to QR 225 ($49 - $61) per square metre per month for standard units due to their location and popularity among the residents. There has been little change to these rental levels, with limited transactional evidence to benchmark rents, as no new space has been released to the market and existing units are rarely transferred between retailers.”
To conclude, DTZ advisors say in the short to medium term, the organised retail market outlook remains ‘fundamentally sound’ with demand continuing to outstrip supply. As a result, vacancy rates are expected to remain low even as retail stock increases. DTZ expect to witness moderate rental growth on new developments which can add diversity, exclusivity and depth to the retail market.