DOHA: The demand for office space and residential market is improving in Qatar, says a report released by a key real estate services firm for the first quarter (Q1) of this year.
The office market continues to suffer from oversupply, but DTZ, the real estate services firm which has released the above report, says it has recorded renewed occupier confidence in 2010 with registered demand increasing by 62 percent compared to 2009.
Similarly, the Q1 indicates continued optimism with 18 new companies registering requirements totalling over 50,000sqm. This demand has been led by government sector activity.
Total current office stock in Doha is estimated at 3.4 million square metres of which 50 percent is considered Grade A. The Diplomatic District, which is regarded as Doha’s new central business district (CBD), accounts for just over 70 percent of the current Grade A stock. In comparative terms, all other locations are considered secondary.
At the end of 2008, there were 46 completed, high-rise commercial office towers within the Diplomatic District providing 680,000 square metres of leasable accommodation. That figure now stands at 1.3 million square metres, equating to a 92 percent increase in supply over 27 months.
There is currently approximately 268,000 square metres of space being marketed as being available to lease, producing a vacancy rate of 21 percent in comparison with 14 percent recorded in March 2010 and less than five percent at 2008-end, the DTZ report said.
Increased demand for prime office space has stabilised rents which has been witnessed in the latter half of 2010 and Q1 of 2011. In the Diplomatic District, rents have traditionally been higher than in other office locations in Doha with rates peaking by mid-2008 at QR310 per sq m / month. Prime rates in the Diplomatic District over 2010 have stabilised at around QR230 per sqm/month; however it is possible to secure secondary accommodation from rates as low as QR140 per sqm/month. Small suites of less than 500 sqm in size are still at a premium and in good quality accommodation, rates of QR250 – 270 per sqm/month have been achieved.
The demand for residential property has also shown signs of improvement over the latter 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.
Rents for prime residential property in locations such as Lagoon Plaza and The Pearl range from QR8,500 – QR14,000 per month (for a two bed apartment), subject to situation, finishes, unit size, onsite amenities and furnishing. DTZ expect rental levels to continue to stabilise over 2011.
Rentals for the best compound villas have also decreased due to oversupply in the market; albeit the average reductions have been less than 10 percent and have also shown indications of stabilising since mid 2010.
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 QR23,000 rising up to QR45,000 per month.
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 current retail stock in Doha is dominated by large-scale retail developments which extend to approximately 580,000 sqm of GLA across eight main retail schemes. There is potentially an additional 197,000 sqm of such retail stock coming onto the market before the end of 2012, if all planned developments are realised and delivered on time. That will equate to a 34 percent increase in supply.
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.
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 percent 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.
Qatar’s successful World Cup bid will 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.
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