Qatar economic growth fuels real estate investments

Qatar economic growth fuels demand for residential units. Qatar will remain at the forefront of the GCC real estate market in the years to come as the country is investing heavily in new infrastructure and real estate projects to prepare itself for the 2022 FIFA World Cup, a leading investment firm has said in its latest report.  In its review report for GCC real estate, Al Masah Capital has said that over the past decade Qatar has witnessed rapid economic development and demographic changes, including the influx of expatriates, which in turn has increased the country’s overall population.  This coupled with rise in per capita income has fuelled the demand for residential units in Qatar, the report said.

The pearl Island in Qatar
The Pearl Island in Qatar

According to the report, demand for residential units is expected to reach 266,000 units by the end of 2018. Despite an approximate 3 percent annual increase in supply, the report said that high population growth rates of around 11 percent per annum will keep the residential market of Qatar undersupplied in the years to come.  The report said that Doha has suffered from a continuous undersupply of residential units resulting in increasing house prices. An undersupply situation caused residential rents to increase by 10 percent in 2013 and 4 percent in 2014, with the upward trend anticipated to continue through 2016.
The overall demand for units stood at around 177,000 in 2014, whereas the market supply was estimated at 129,200 units in the same year. The report estimates that the stock is expected to exceed 160,000 units by the end of 2018, much below the demand.  Approximately an additional 9,000 units are due to enter the market between 2016 and 2018, the report said.
As growth in office space, the report said that Grade A office stock is expected to reach 3.6 million sqm by the end of 2016, with fresh stock of 144,000 sqm to be added in the fourth quarter.
Around 168,000 sqm of additional space is expected to enter the market in 2017, taking the tally to approximately 3.8 million sqm by the end of 2018, the report said.  For Grade B and Grade C commercial space, Qatar’s office sector is mired in oversupply challenges with limited demand and high vacancy levels of around 29 percent.  Given the forthcoming projects in the pipeline, the report said, the market is likely to remain oversupplied in the short to medium term.

About the retail market, the report said that Qatar was expected to continue its aggressive expansion in the coming years as the supply of retail space was expected to almost double to reach 1.9 million sqm of gross leasable area (GLA) by the end of 2018. Anticipating surge in tourists due to 2022 FIFA World Cup, the report said, Qatar has planned for the development of several hotels in Doha in the next few years with the number of hotel rooms expected to reach 95,000 keys by 2022 from 14,300 keys in 2014.  The announced future hospitality supply is overwhelmingly 5-star with a share of 48 percent, while 4-star hotels have also started to gain prominence, due to the current economic slowdown, accounting for 48 percent of the total pipeline.
Qatar’s demand for hotel rooms has been on the rise, with a recorded growth of 12.1 percent per annum between 2009 and 2014, while supply is estimated to have increased by 13 percent over the same period, resulting in an occupancy level of 72 percent in 2014.
This marginal mismatch in the growth pace of supply and demand has led to a decline in room rates, as the market competes for customers. The city’s total room count stood at 15,760 in 2015 and around 4,964 additional rooms are expected to enter in the fourth quarter of 2016, taking the tally to 21,850 by the end of 2016. The figures are projected to reach over 24,100 by 2018 with approximately 2,298 units expected to be added in 2017. Going forward, the report said, the slowdown in economic activity is expected to shift demand for hospitality accommodation towards hotels offering more affordable room rates.  The hotel market occupancy is expected to close at 66 percent in 2016, lower than that in 2014-15, but still higher than some of the other GCC nations.

Sources: QGN, Gulf Agencies, Ahlen Royal Hospitality.