PROPERTY TIMES

Vacancy rates increase in
the office and residential
sectors
Qatar Q1 2016

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increasing supply to over 20. 2009 – 2016.brookes@dtz. with high occupancy rates throughout the sector.800 25% 1.com Edd Brookes General Manager DTZ Qatar +974 5586 7044 edd. most notably on The Pearl-Qatar  The increase in vacancy has resulted in rents stabilising. semi-state bodies and oil and gas companies have largely withdrawn from the office market.400 1. often from companies within Doha who are looking to downsize  The continued growth in population has maintained demand for residential property catering to the lower to middle income demographic.com Property Times 1 .com Figure 1 West Bay Office Supply Vs Availability. Qatar +974 7404 3927 johnny. which are due to open in 2016 and 2017 Contents Economic Overview 2 Office Market Overview 3 Residential Market Overview 4 Hospitality Market Overview 5 Retail Market Overview 6 Author Johnny Archer Associate Director Consulting & Research. There has been strong interest from retailers for units in the various retail malls.com Contacts Mark Proudley Director Consultancy & Commercial Agency.DTZ Research PROPERTY TIMES Vacancy rates increase in the office and residential sectors Qatar Q1 2016 31 March 2016  Qatar’s economic reliance on the hydrocarbon sector has resulted in further cuts to government spending in Q1 2016.200 15% 1. and villas in residential compounds  The hospitality sector has experienced falls in occupancy rates as fifteen new hotels/hotel apartment buildings have opened in the past year.000 rooms  The supply of leasable accommodation in ‘organised’ retail malls remains at 643.600 20% 1.archer@dtz.000 sq m) 1. and in some cases decreasing for prime apartments.000 800 10% 600 400 5% 200 - 2009 2010 2011 2012 Diplomatic District 2013 2014 2015 Q1 2016 0% Availability Source: DTZ Research www.dtz.000 sq m. as oil prices fluctuated between $38 and $42 per barrel in March. (.  There has been a significant drop in demand for new office lettings as government departments. although signs of increasing vacancy have emerged in some areas  The availability of prime residential accommodation has increased due to a combination of new apartment building completions and reduced demand. DTZ estimates that these bodies accounted for 65% of Grade A office lettings in West Bay between 2009 and 2014  Demand for office accommodation in the private sector is concentrated around requirements for less than 250 sq m.proudley@dtz. Qatar +974 5584 8281 mark.

The extent of the drop in oil prices has resulted in cuts to various government budgets for 2016 as a fiscal deficit is forecast for the first time in 15 years.200.000 In anticipation of a budget deficit in 2016 the Finance Minister confirmed that Qatar will finance any shortcomings through debt instruments in local and international finance markets. which suggests that a fall in supply will not be immediate. In June 2015 the Ministry had predicted GDP growth at 7. major infrastructural projects are progressing as planned. Due to the performance of the Hydrocarbon sector.000 2. The current cost of projects that are underway is QAR261bn.7% by year end. the hydrocarbon sector still accounted for approximately 32% of total GDP in Q4 of 2015.000.000 2012 2014 2016 2018 2020 Growth at 3% per annum Trading Economics Forecast Statistica Source: MDPS/Trading Economics/Statictica/DTZ Research Property Times 2 . however it is anticipated that this will increase again. as major projects get underway between 2016 and 2019 in preparation for the World Cup in 2022.000 www.000.000 2. Following the removal of international sanctions.QATAR Q1 2016 Economic Overview Despite substantial government expenditure in recent years to help reduce the reliance on the hydrocarbon sector.9bn from previous fiscal year. GDP growth is driven exclusively by the non-oil and gas sectors. however. 1. driven by the construction sector.000 1. 10 400. S&P noted that Qatar’s macroeconomic fundamentals remain solid despite the challenges the state is facing.800. -10 20 15 10 5 0 -5 2007 2008 2009 2010 2011 2012 2013 2014 2015 -15 -20 Source: EIU Consumer price inflation Rental Inflation Figure 4 Population Growth Forecast Despite the fall in oil & gas revenue.4% in Q4 2015. and the recent fall in oil prices.7bn estimated for 2015.6bn. which excludes projects in the energy and private sectors. Iran reiterated its pledge to increase oil production. Figure 2 GDP (QAR Million) and Real GDP Growth (%) 1.com Qatar Real GDP Growth (%) Source: GSDP The Ministry of Development Planning and Statistics confirmed in December 2015 that the country’s economy was expanding at a lower rate than previously forecast.dtz.000 200. Projected revenues for 2016 are QAR150. The international credit rating agency warned however.000 1.000 20 800. The projections for 2016 are based on the assumption that the average oil price for the year is $48 per barrel. a fall of QAR15. which grew by 7. The inflation rate in Qatar fell to 1.9% in 2015 .3% for the year. that the government’s balance sheet will deteriorate as long as oil prices remain subdued. Whether the efforts of the various governments will be a success remains uncertain.000 15 600. maintaining economic growth.600. The price of crude oil has fluctuated between $38 and $42 per barrel throughout March.000. or selling assets.400. these forecasts were revised down to 3. having hit a 2016 low of $30 per barrel in mid-January.000 5 0 0 Nominal GDP (QR Million) Figure 3 Inflation (%) 35 30 25 The governments of Qatar and other oil-producing nations such as Saudi Arabia and Russia agreed on 16 February to freeze production at January’s levels of output. 3. rather than tapping into its national savings. Existing oil-producing nations also pumped oil at record levels in January. in an effort to halt the decline in oil prices. down from QAR225. The Standard & Poor’s (S&P) credit ratings agency recently confirmed Qatar’s AA rating and stable outlook.5bn. Projected expenditure for 2016 is QAR202.

Recent government budget cuts. The increase in availability.800 25% 1.000 15.000 35.400 1. that were completed between 2013 and 2015 were not released to the market in anticipation of leasing deals to government bodies.24 million sq m is available to rent. More typically. Grade A offices in West Bay currently command between QAR 150 and QAR250 per sq m per month depending on the size of units and quality of the building. however this demand has also fallen since 2014.63 million sq m. the available space has now been put on the market. 1.600 20% 1. and reduced demand has started to impact the quoted rents for offices in Doha.000 sq m of this is at the QP District.000 40. Airport Road. The availability rates had dropped to below 10% by 2014. as enquiries have increased from professional services companies looking to relocate to smaller or more cost effective premises on the expiry of their existing leases. and C/D Ring Roads typically command between QAR120 and QAR170 per sq m per month. DTZ has also witnessed a trend of ‘downsizing’ in the private sector. QAR/sq m/month 300 250 200 150 100 2010 2011 2012 2013 2014 2015 Q1 2016 Diplomatic District .com Property Times 3 . Between 2008 and 2014. This is likely to be compounded in the next 2-3 years due to the large pipeline of new supply. The total supply of office buildings in West Bay currently stands at approximately 1. depending on the age and the standard of finish of the building. however over more than 200.QATAR Q1 2016 Office Market Overview Figure 5 West Bay Office Supply v Availability 2009-2016 . the past 6 months has witnessed a reversal of this trend. which may not be available to the market.000 0 Const Fin Serv Tech Govt Oil&Gas 2014 2015 Prof Serv Misc Source: DTZ Research Figure 7 Prime Office Rents by District.000 sq m of new office accommodation is likely to complete in West Bay within the next 12-18 months. which was largely the result of government bodies reserving a large proportion of towers that completed construction between 2013 and 2015.200 15% 1. of which approximately 0.000 10. due to the prolonged period of low oil prices has resulted in a significant drop in the overall demand for office space since early 2015. A number of office buildings in West Bay.Average Airport Road C/D Ring Road and Al Sadd Source: DTZ Research www.000 20. As activity in this sector dried up. both in West Bay and Lusail.000 25.Prime Diplomatic District . DTZ anticipates that approximately 300.000 30.000 5. The majority of enquiries for office accommodation in the private sector relates to requirements of less than 250 sq m. increasing the supply of available accommodation. sq m 45. Typically the higher rents are only achievable for small units in prime buildings.dtz.000 sq m Following a sustained period of increasing occupancy rates in the prime office district of West Bay.000 800 10% 600 400 5% 200 - 2009 2010 2011 2012 2013 2014 2015 Diplomatic District Q1 2016 Availability 0% Source: DTZ Research Figure 6 New Office Demand Registered by DTZ 2014 v 2015. Rents in areas such as Old Salata. Al Sadd. an estimated 65% of office lettings in West Bay were to government or hydrocarbon related companies. rents of between QAR150 and QAR180 per sq m are being quoted for larger office floorplates.

000 and QAR15.000 6. This has resulted in reduced demand good quality residential accommodation throughout Doha.000 20.000 35.000 4.000 2. The shortage of available accommodation created upward pressure on rents in both the apartment and villa markets. This has resulted in increasing vacancy levels for primary and secondary apartment market. QAR/sq m 16.000 per sq m.000 2011 2012 One Bed 2013 2014 Two Bed 2015 Q1 2016 Three Bed Source: DTZ Research Figure 10 Average Freehold Sales Prices. 40.000 8.000 5. 21. No.dtz.com Property Times 4 .000 Construction of new villa compounds throughout Doha has been limited in comparison to apartment buildings. however DTZ expect to see rents fall in 2016 as landlords try to secure tenants in a more competitive environment.000 per sq m.000 11. Freehold prices on The Pearl Qatar increased steadily between 2011 and 2015. Source: DTZ Research The supply of new residential accommodation has increased in recent months and this trend will continue throughout the year as a significant number of apartment projects reach completion. It is becoming increasingly common for companies to provide a rental allowance rather than employee accommodation. and a subsequent knock on effect in the private sector.QATAR Q1 2016 Residential Market Overview Figure 8 Prime Apartment Supply by District.000 15. and new units can achieve in excess of QAR17.000 14. where second hand units typically trade at between QAR13.000 12. with annual growth of between 5% and 10% per annum evident throughout the Doha market. Local investors make up the majority of purchasers. DTZ estimates that the supply of apartments may increase by more than 30% in 2016 as new towers in both Porto Arabia and Viva Bahriya near completion.000 30. however it is thought that much of the increase is represented by lower to middle income workers in the service and construction workers.000 15. and rents inclusive of utility bills became common in 2015. DTZ believe that occupancy rates for compound villas will remain relatively high. 5.000 Over the same period there has been extensive redundancies in the hydrocarbon and government sectors.4 million. with less downward pressure on rental levels. DTZ has also witnessed a fall in demand for corporate residential lettings of entire residential blocks and compounds. On The Pearl-Qatar. The changing dynamics in the market suggest that recent signs of falling rents in the apartment sectors may continue throughout 2016. Pearl Qatar.000 25. Incentives such as rent free periods.000 7. of apartments The supply of residential real estate in Qatar struggled to meet demand between 2011 and 2015 as the population during that period increased from 1. QAR/Month 19.7 million to 2.000 9. This reflected a 9% increase between January and December.000 10. which has been the driver of real estate demand in Qatar remained strong in 2015.000 13.000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Diplomatic District Pearl Lusail Msheireb Figure 9 Prime Apartment Rents.000 Population growth.000 0 2009 2010 2011 2012 2013 2014 2015 Q1 2016 Source: DTZ Research www.000 17. 10. however recent months has seen a fall in sales activity and prices have stabilized. While there has been an increase in vacancy levels.

To date. of Hotel/Hotel Apartment Establishments by Rating Based on official figures released by the Qatar Tourism Authority the supply of hotel accommodation in Qatar at the beginning of 2016 reached approximately 20.dtz.93 million. 2009 2010 2-star 11% 2-star 3-star 50% 4-star 5-star 38% Source: DTZ Research Figure 13 Hotel Apartment Performance Indicators. however in DTZ’s opinion.QATAR Q1 2016 Hospitality Market Overview Figure 11 No. 56 hotels and 13 hotel apartment buildings.700 keys between hotels and hotel apartments. Based on official QTA figures. In addition. which saw an 8% increase in occupancy rates. Room revenues have been reducing in Qatar over the past four years. while RevPARs in February fell by 25% from the corresponding month in 2015. the Qatar National Tourism Sector Strategy Plan 2030 has set out a program to invest $45bn in tourism projects over the next 15 years. The aim of the program is to attract a larger amount of tourist numbers from outside GCC. following two years of limited new supply. there are proposals for another 130 establishments.5% and 8. limited information on the proposed tourism projects has been released. This was in sharp contrast to the previous year. 2011 2012 3-star 2013 4-star 2014 2015 5-star Source: DTZ Research Figure 12 Keys by Rating Q1 2016 (Total 20. Based on QTA 2015 Annual Tourism Performance Report.com Property Times 5 . occupancy rates in the hospitality sector declined in 2015. Of the current supply. due to the pipeline of new hotels being developed throughout Doha. H1 2015. are currently under construction and due to be released within the next five years.7% increase on arrivals in 2014. This reflected a 3. Despite growing tourist arrivals. increasing the number of hotel and hotel apartment establishments to 119. an oversupply of accommodation will curtail some of the proposed new development.6% in February. Occupancy in % 600 88% 86% 500 84% 400 82% 80% 300 78% 200 76% 100 0 74% Standard ADR Deluxe RevPar Overall 72% Occ % Source: QTA/STR Global www. as Average Daily Rates and Revenues per Average Room experience annual falls of 5. the QTA expect 20 hotels and hotel apartments to open in 2016. Of these. In total. 140 120 100 80 60 40 20 0 In an effort to support the expanding hospitality sector. ADR & RevPar in QAR.5% respectively. largely as a result of the increases in supply outstripping growth in demand. with an ambitious target to increase overall annual arrivals to 7 million by 2030. the total number of tourist arrivals reached 2.653 rooms. approximately 88% is categorized as either 4-Star or 5-Star. with a total of 26. 15 new hotels and serviced apartment buildings opened in 2015. MDPS statistics released in March confirmed that the ADRs experienced a year on year fall of 9.713) 1% It is likely that occupancy rates in the Qatar hospitality sector will experience further pressure in the coming years. This reflects a 30% increase in supply of rooms over a 12 month period. This trend continued in 2015.

while larger stores can secure rents of between QAR170 and QAR220 per sq m per month.000 1.This represents a 220% increase on current supply. The two largest shopping centres. New demand. Mirqab Mall Al Hazm Mall Doha Mall Katara Mall Tawar Mall Mall of Qatar Katara Mall Doha Festival City Northgate Place Vendome Marina Mall Elsewhere. representing the highest level of disposable income per capita in the world. In 2014 the World Bank estimated that the GDP Per Capital GDP (PPP) reached $145. and following a period of tenant fit-outs. Doha Mall. coupled with the high occupancy levels in all of the existing malls has resulted in strong rental growth in the past 12 months.3 million square meters of retail space is currently at various stages of construction and is scheduled to open by 2019.000 sq m (GLA) 2. Demand remains strong from retailers looking to either enter the Qatar market. retail mall accommodation in Qatar is 643.000 DTZ understand that a large number of international brands have agreed lease terms on various new developments including Mall of Qatar.894. the majority of retail units have now opened for business. the overall supply of purpose built. Villaggio Mall and City Centre Mall. on The Pearl Qatar. account for 39% of the current supply. and if completed as planned will have a major impact on the dynamics of the retail market in Qatar. Based on DTZ’s assessment.000 sq m of leasable area in Salwa Road and Barwa Commercial Avenue.500 1. contained in 14 purpose built malls. Location Project 500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: DTZ Research Figure 16 Headline Retail Rents.com Property Times 6 . Rental levels in these locations typically range from QAR120 to QAR170 per sq m. and strong occupancy rates are expected on these malls when they open in the next 12 -24 months. Rents in prime malls currently range from QAR260 to QAR300 per sq m per month for the standard line units. or expand their existing presence. which has been driven by the increasing population as well as high disposable income. Doha Festival City and Place Vendome. The showroom retail market is estimated to comprise more than 800.dtz. . no new malls have opened since Gulf Mall in early 2015. Estimated Completion Date Al Mirqab Street Markhiya Abu Hamour Al Qassar Duhail Al Rayyan Katara Umm Salal North Doha Lusail Lusail 2016 2016 2016 2016 2016 2016 2016 2017 2017 2017 2018 Source: DTZ Research Figure 15 Organised Retail Supply by Year. Qatar has benefitted from strong growth in retail trade in recent years. DTZ estimates that in excess of 1. QAR/sq m/month 350 300 250 200 150 100 50 0 2009 2010 2011 Shopping Mall 2012 2013 2014 2015 Showroom Source: DTZ Research www. Medina Central opened in 2015.QATAR Q1 2016 Retail Market Overview Figure 14 Proposed New Retail Malls Qatar is about to enter a period of strong growth in retail supply with a number of new retail malls nearing completion Despite the large number of retail malls under construction.000 sq m. Porto Arabia has also seen an increase in activity with a number of new arrivals on the retail promenade in recent months.500 2.

com visit our Facebook page 2012 at 2007 or 2008 2009 2010 2011 2013 2014 Q3 2015 https://www. Cushman & Wakefield. DTZ Qatar 12.000 brings international best practice and local expertise to the market. Information contained herein should not.dtz. professional advice.brookes@dtz.com Mark Proudley Director Consultancy & Commercial Agency +974 4483 7395 mark. commercial agency. valuation. With a long standing track record in 9.com Johnny Archer Associate Director Consulting and Research +974 4483 7395 johnny. For more information please visit: www.proudley@dtz. © DTZ 2016 About DTZ Qatar 21.DTZ Middle East Contacts Edd Brookes Senior Director General Manager +974 4483 7395 edd.dtzqatarproperties. providing consistent and responsible service DTZ Qatar operates to international best practice 3. consultancy and research.000 18.000 DTZ Qatar is a member of the global real estate services business. reproduced or referred to without prior approval. Any such reproduction should be credited to DTZ.com/research .000 15. Whilst facts have been rigorously checked.com/DTZQatar. our aim is to play an integral role in the country’s vision of sustainable growth. be published.com Adam Stewart Associate Director Head of Valuation +974 4483 7395 adam. Our offering includes: residential agency. property and facility management.000 the Qatari market.facebook.stewart@dtz.000standards. Qatar Office Mezzanine Level Tornado Tower West Bay Doha phone +974 44837395 To see a full list of all our publications please go to www. qualified.000 to our clients.com Disclaimer This report should not be relied upon as a basis for entering into transactions without seeking specific. 0 and local and global investment opportunities. DTZ can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. in whole or part. 6.archer@dtz.

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