The government and hydrocarbon sector withdrawn from the office real estate market

Qatar’s leading global real estate company, DTZ, released its Q4 2015 Qatar market report. Among many findings, DTZ’s research team identified a slowdown in Grade A office letting throughout 2015. With 300,000 sq m of new Grade A office accommodation becoming available within the next 12-18 months, there is a risk of downward pressure on rental prices in Doha.

The increase in the country’s overall population to 2.42 million, up 8% over the 12 months to December 2015, continues to generate demand in the residential market, albeit largely at the lower end of the market. In December 2015, the Shura Advisory Council called on the relevant authorities to curb the increasing levels of rent, possibly by introducing rent controls. DTZ are of the opinion that changes in residential market trends, which have been evident in recent months suggest that market forces may dictate a fall in residential rents, alleviating the need for rental caps.

There has also been a fall in demand for corporate lettings for residential blocks and compounds with more companies now preferring to provide rental allowances rather than paying for employee accommodation. In the hospitality sector, 1,900 hotel keys were added to Qatar’s stock in 2015 although DTZ noted downward pressure on average daily rates (ADR’s) with a drop of 12% compared to the same period in 2014.  Pressure on performance metrics in the hospitality sector is likely to continue, as up to 80 new establishments are expected to increase supply by approximately 18,000 keys over the next 3 to 5 years.

Commenting on the findings of DTZ’s latest report, Mark Proudley, Associate Director, Consultancy and Research, DTZ, stated: “In the final quarter of 2015, Qatar’s real estate market started to show signs that the drop in hydro-carbon prices is really beginning to bite. We think this is likely to continue into 2016 and the sector needs to be ready for a few tough months. But the long-term trajectory for Qatar remains good with the government’s significant infrastructure investment, valued at QAR261bn (US$71.68 bn), providing welcome and fundamental support to the wider RE economy.  Furthermore, for the hospitality sector, the Qatar National Tourism Sector Strategy Plan 2030 has earmarked US$45bn for tourism projects over the coming 15 years and as FIFA 2022 gets closer I am confident that Qatar’s RE market will start to feel some of the positive effects of this spending. ”