Despite odds, Qatar’s real estate sales market remained buoyant in Q4
October and November saw an increase in the number of real estate transactions by 42 percent compared to the same months in 2019
DESPITE unusual market conditions, Qatar’s real estate sales market remained buoyant in the fourth quarters of 2020, according to Cushman and Wakefield Qatar (CWQ).
October and November saw an increase in the number of real estate transactions by 42 percent compared to the same months in 2019, the report said, citing Planning and Statistics Authority (PSA).
As Qatar entered the fourth phase of the lifting of COVID-19 related restrictions in Q4, most business activity started to return, albeit with strict social distancing and preventative measures, such as maskwearing, in place.
Restrictions on travel into Qatar remain tight, with those arriving obligated to quarantine either in designated Quarantine Hotels’, or at home.
Real estate development continued at a fast pace in Q4, the report said, adding that notable development projects, including Commercial Boulevard and Katara Twin Towers in Lusail are now substantially complete ahead of the FIFA World Cup, which kicks off in less than two years.
Cabinet Resolution No(28) of 2020 officially confirmed the introduction of new zones where non-Qataris can own real estate. In response to the increasing demand for real estate ownership from nonQataris, the Ministry of Justice and Ministry of Interior set up a designated office in The Pearl-Qatar in October that registers non-Qatari real estate ownership
Office market
Cushman and Wakefield estimates that overall office supply in Doha is approaching 5 million sq m, of which almost 50 percent is situated in the prime districts of Lusail, West Bay, and Msheireb.
The most significant increase in new office supply over the past year has been in Lusail, both in the Marina District and in Energy City. Office supply in Lusail now tops 600,000 sq m.
There has been a noticeable shift in corporate office demand towards Lusail over the past year, as more buildings are being completed and the area matures. The migration of government entities and Q-companies’ to the new district and the relatively competitive rental levels on offer has also helped attract privatesector companies to high-quality multi-let buildings in the Marina District. Lusail’s Marina district can now offer tenants highspecification office buildings, with greater access to parking than is currently available in West Bay.
Lease expiries have generated most of the office market activity throughout 2020, as companies relocate within the market. New demand from outside Qatar was subdued in 2020 however, this has been down, in part, to the impact of COVID-19 on the global economy and travel. As we move beyond the pandemic, the establishment of the Qatar Free Zone Authority is expected to help attract inward investment and boost demand for office space.
The combination of new supply, and a lack of new demand continued to put downward pressure on office rents in 2020.
Prime office accommodation, such as CAT A’ and fitted’ office space in West Bay is typically available for between QR100 and QR40 per sqm per month exclusive of service charges.
Prime office suites in Lusail remain available at lower rents that their equivalent in West Bay, although as absorption in Lusail increases, we expect this gap to close.
Shell-and-core offices are now available to lease for between QR70 and QR90 per sq m per month in West Bay. Shelland-core offices in secondary locations can be leased for as little as QR60 per sq m per month.
The reduced rents for shelland-core’ space reflect the fact that companies want to avoid the capital expenditure required for an office fit-out. Private sector demand for offices is almost exclusively concentrated on CAT A or fitted offices.
Residential Market
New real estate ownership laws boost demand for apartments in Lusail Recent amendments to real estate ownership laws allowing nonQataris to purchase real estate in 10 zones have significantly boosted the
residential sales market in recent months. This has been most notable in Lusail where apartments in the Al Erkyah and Yasmeen districts have seen an increasing volume of sales.
Demand for real estate sales has been boosted by expatriate purchasers, who can take advantage of the new ownership laws.
The laws provide owners with the permanent residency card privileges for property investment above QR3,650,000 and the benefit of a residency permit without a sponsor for those spending more than QR730,000.
The release of apartments in Lusail for prices between QR800,000 and QR1,800,000 are typically available with flexible payment plans, providing an opportunity to invest in property that had not been available to the same degree before 2019.
According to the Planning and Statistics Authority, there was a 25 percent increase in residential sales transactions in October and November 2020 compared to the same months in 2019.
The COVID-19 related restrictions to international travel have stifled recruitment in Qatar, resulting in a drop in new demand for residential rental properties in 2020. The increasing supply, and the interruption in demand, has seen rents stagnate in recent months. The increase in affordability over recent years has helped to drive leasing activity as residents increasingly look to upgrade their accommodation.
Monthly rents for two-bedroom apartments on the Pearl-Qatar are now typically between QR9,500 and QR12,000, while rents for twobedroom units in Al Sadd typically range from QR5,000 to QR6,500. rents for two-bedroom apartments in Fox Hills, Lusail now range from QR6,000 to QR7,500 per month.
The increase in new supply has resulted in additional choice for tenants. Professionally managed apartment buildings with onsite facilities management are usually favoured ahead of individually owned units.
Qatar’s residential real estate market will be influenced by hosting the FIFA World Cup in 2022. The Supreme Committee for Delivery and Legacy is expected to lease thousands of apartments on Eskan leases of between one and five years from late 2021. The absorption of these apartments is likely to offset the increasing supply and support rental levels in the short to mediumterm.
Hospitality Market
According to National Tourism Council Statistics, the supply of hotel keys increased to 28,249, by September 2020, a 5 percent increase in 12 months.
More than 20,000 additional hotel keys are currently under construction and will complete before the FIFA World Cup in 2022. The COVID-19 pandemic delayed the delivery of new hotels in 2020, which is likely to result in a sharp increase in supply in 2021.
The most recently released statistics from the NTC show that COVID-19 lockdown measures severely impacted hotel performance from March of 2020, after a promising start to the year. Despite an increase in year-on-year tourist arrivals by 32 percent in January and February, year-to-date arrivals had fallen by 63 percent by the end of September.
Overall, Qatar’s hotel occupancy rates reached 69 percent in February 2020, underscoring the improving performance in the tourism sector however, the introduction of lockdown measures resulted in an immediate drop to 55 percent in March. While the government utilised several hotels for quarantine purposes throughout the year, the occupancy rates for available hotels fell to between 44 percent and 46 percent during the summer months.
Overall Average Daily Rates fell to below QR297 in May but recovered to QR437 in August. Average Daily Rates had dropped just 2 percent on 2019 figures for the nine months to the end of September.
The approval of a COVID-19 vaccine for use in Q4 was welcome news to the hospitality sector. Despite this positive development, hotel performance metrics are unlikely to improve significantly for several months as governments take a cautious approach to re-opening and travel until vaccinations have been widely rolled out.
The lifting of the blockade of Qatar by the Saudi-led coalition in January is expected to provide a timely boost to Qatar’s hospitality sector – although COVID-19 restrictions will delay the return of visitors. Before the introduction of the blockade, tourism from within the GCC contributed almost 50 percent of all arrivals to Qatar.
Retail Market
Retailers benefitted from the full re-opening of retail malls in Q4 following six months of restrictions. While social distancing and other safety measures remained in place, footfall increased significantly towards the end of the year.
Demand for retail space in Qatar is dominated by food and beverage operators, and small businesses looking for kiosk space. Traditional fashion retailers have generally been reluctant to lease additional accommodation throughout 2020, as the COVID-19 pandemic reduced footfall in malls and has accelerated the global trend towards on-line shopping.
While some retail malls continue to perform well, the significant increase in supply since 2015 has resulted in an increase in vacancy in some malls as the market reached saturation point.
In early 2020 occupancy rates in Qatar’s main retail malls had fallen to an average of 83 percent. The enforced closure of retail malls due to the COVID-19 pandemic has increased vacancy rates further in Q4 as retailers struggled to deal with the interruption to their businesses.
Overall organised retail space in Qatar amounts to approximately 1.5 million sq m. There is currently about 1.3 million sq m of gross leasable retail space in Doha’s 18 largest destination malls. The proposed opening of new developments in 2020, including Doha Mall, has been delayed due to the COVID-19 pandemic. We expect supply to increase considerably in 2021. Approximately 575,000 sq m of new retail space is currently at various stages of construction and fit-out.
Outside of the main organised retail malls, outdoor destinations including Souq Waqif, Katara Cultural Village, Medina Centrale, and La Croisette provide more than 230,000 sq m of leasable space. Al Furjan markets continued to be rolled out in 2020. The markets are a government-led initiative to provide local retail conveniences within residential communities, offering discounted rents to small businesses.
Rents for typical line’ retail stores in Doha main organised malls typically range from QR200 to QR350 per sq m month, with lower rates available for larger outlets. Retail malls have traditionally offered 5-year lease terms however, tenants now seek greater flexibility given the challenging market conditions.
While headline rents have not significantly decreased in many of the main malls throughout 2020, many retailers have been offered temporary discounts or rent holidays this year to help deal with the impact of the COVID-19 impact.