Mat Green DOHA - Qatar’s prime retail malls continue to enjoy relatively stable rentals and high occupancy rates, despite the ever increasing supply and the emergence of weaker consumer confidence, according to the H1 2016 Qatar MarketView by global real estate consultancy firm CBRE.
Villagio and City Centre Doha are two of the country’s main shopping destinations, with average daily footfalls of around 46,000 and 45,000 respectively. However, competition levels are rising rapidly, with close to 1.27 million square metres of new retail GLA set to be completed over the next three years alone, signaling a clear risk of over saturation.
"The emergence of this huge new supply, which equates to around 83% of the current organized retail stock, is expected to drive down rental rates right across the market, although aging centers are likely to suffer the most as game changing centers such as Doha Festival City and Mall of Qatar attract customers from existing centers," said Mat Green, Head of Research & Consulting UAE, CBRE Middle East.
Looking at Qatar’s office market, the H1 Qatar MarketView has found that landlords are now facing stiffer competition to secure new tenancies amidst weakening demand fundamentals and a surplus of available office supply.
Over the past six months, the number of new office requirements, and overall take-up levels, have declined notably, subsequently creating deflationary rental pressures across the market as vacancy rates have started to rise.
Commenting on the office market, Green said, "Ultimately, the weak performance of the hydrocarbon sector and the knock-on impact on oil and gas and government related occupiers has led to an anemic performance across the market, with overall commercial activities declining, reflecting the subdued business environment."
This has resulted in declines in the average prime rental rate, which has fallen 2% quarter-on-quarter and 4% year-on-year to QAR230/m2/month. The outlook is for a sustained period of rental deflation for both prime and secondary office spaces, with occupancy rates likely to see significant erosion. As a result, landlords are having to become more flexible with their leasing and payment terms, as they seek to maintain occupation of their buildings.
Low to mid-end residence rates remain stable while prime residential rates see most pronounced decline
According to the H1 2016 Qatar MarketView, residential rental rates have started to show more pronounced declines after years of prolonged growth. Over recent months, demand levels have weakened substantially amidst widespread company downsizing and lower levels of recruitment in both the public and private sectors.
So far, declines have been most prevalent within the higher tiers of the residential market, with rental rates falling by over 10% in some cases since the start of the year. However, the market average decline is actually around 5% over the past six months.
"Whilst rentals are tumbling for some prime units, rates for low to mid-end residences have actually remained relatively steady. This has been driven by the lower levels of new supply in this segment, sustained population growth and deflationary wage pressures which have forced some employees to seek lower cost accommodation alternatives amidst an uncertain economic environment. This trend is likely to pick up pace in the short term as vacancy rates rise, particularly in freehold locations such as The Pearl Qatar where there is an active secondary market," said Green.
Qatar has around 145,000 completed residential units, including those with commercial components. Over the next three years, CBRE expects to see the addition of around 28,000 new residential units, with majority large number of these apartments to be delivered in locations such as Pearl Qatar, Lusail City and West Bay.
Hospitality sector performance reveals opportunity to diversify target guest segments
Qatar has posted the highest drop in RevPAR in the GCC region during the sixth months to June 2016, according to data from STR Global. RevPAR fell by around 22% (year-to-date) from QAR405/room/night to QAR317/room/night following a double-digit decline in occupancy rates and sustained drops in ADR’s during the period.
Green commented, "This underlines what has been a very challenging period for the local hospitality market, and reflects the combined negative effects of market seasonality and the recent slump in corporate demand."
"With a large pipeline of new hotel keys currently under construction and set for imminent delivery, pressure on hotel owners and operators is set to continue with further downward movement in ADR’s and occupancy rates a real possibility. What has been evident from the recent slump is that the market has an opportunity to establish a wider mix of hospitality demand generators to strengthen the overall market potential," Green noted.
(c) 2016 The Saudi Gazette. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers