FROM LEFT: Johnny Archer, Director of Consulting & Research at Cushman and Wakefield Qatar, Edd Brookes, Head of Cushman & Wakefield Middle East, and Richard Rayner, Associate Director at Cushman & Wakefield Qatar, during a breakfast briefing on Qatar’s R
Doha: Oversupply in Qatar’s real estate market is likely to reach a peak in the next two to three years as new supply is delivered prior to the 2022 Fifa World Cup. The new supply is likely to slow down thereafter until it is absorbed by new demand, leading global real estate consultant Cushman & Wakefield said in its 2020 outlook which was announced during the company’s quarterly breakfast briefing on Qatar’s real estate performance yesterday.
It added that there will be a temporary peak in demand in late 2022, which will distort the market dynamics temporarily. Major investment in tourism projects should provide a welcome boost to the tourism sector, but sustaining 50,000 hotel rooms may prove a challenge in the coming years. However, government initiatives, de-regulation and relaxed ownership rules will help to diversify the economy and encourage inward investment, which is required to sustain the real estate market.
The high concentration in new real estate development projects continues to put downward pressure on rents, as supply of residential, office, and retail property surpasses the growth in demand. The launch of Qatar Rail services last year also provided substantially increased connectivity between the city’s residential, commercial and leisure districts providing a boost to real estate developments in proximity to the 37 metro stations.
Cushman & Wakefield’s research indicates that Qatar’s overall purpose-built office supply is in the region of 4.8 million sqm, and is expected to increase up to 5.8 million sqm by 2022. Approximately 45 percent of the office supply is situated in West Bay and Lusail.
The office market is likely to see a shift in demand dynamics following the opening of the Doha Metro and the upcoming Lusail Light Rail network, which is expected to open this year. Buildings with immediate connectivity to the rail network are anticipated to experience greater tenant demand and are more likely to maintain occupancy rates and increase their rental levels over time.
Major infrastructure projects have also been boosted by the announcement by the Ministry of Finance that 43 percent of total government expenditure in 2020 will be infrastructure related. This will include the proposed development of Sharq Crossing between Ras Abu Aboud and West Bay, which was relaunched in December.
The Hamad International Airport’s extension, which will initially increase capacity to 53 million passengers annually by 2022 and will be followed by a second phase of expansion to provide for 60 million passengers, will be a boost to the hospitality sector in Qatar in the coming years, the report added.
Demand is also anticipated to grow from the oil and gas sector in 2020. Growth in the oil and gas sector and proposed LNG expansion is starting to impact demand in real estate office accommodation. In its latest Qatar real estate market review (Qatar Q4 2019), Cushman & Wakefield reported seven office requirements within the oil and gas sector in 2019, with an average size of 2,600sqm.
Johnny Archer, Director of Consulting & Research at Cushman & Wakefield Qatar, added that the Qatar Free Zone Authority (QFZA) and Manateq, as potential demand generators for office and warehousing, are helping in the growth of real estate market in the country. The QFZA which recently announced that seven global companies including Volkswagen and Thales Group will commence their operations in the free zones in the new year, will provide a much-needed boost to real estate demand in Qatar from international corporate occupiers.
There have been a number of announcements last year regarding the strengthening of the industrial sector.
On the retail market, overall retail sales in Qatar grew by 10 percent in 2019, which was down from the 18 percent growth recorded in 2018, which reflected a strong rebound from the relatively low numbers registered in 2017.
Edd Brookes, Head of Cushman & Wakefield Middle East and Richard Rayner, Associate Director at Cushman & Wakefield Qatar, also spoke during the event.
