25 August 2016
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, signalling a clear risk of over saturation.

"The emergence of this huge new supply, which equates to around 83 percent of the current organised retail stock, is expected to drive down rental rates right across the market, although ageing centres are likely to suffer the most as game-changing centres such as Doha Festival City and Mall of Qatar attract customers from existing centres," said Mat Green, Head of Research & Consulting UAE, CBRE Middle East.

QatarMarketView's study of the office market during the first half of the year, revealed that landlords were facing stiff competition in securing new tenancies amidst weakening demand fundamentals and a surplus supply of available offices. 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.

This has resulted in declines in the average prime rental rate, which has fallen 2 percent quarter-on-quarter and 4 percent year-on-year to QR230/sqm/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 forced to become more flexible with their leasing and payment terms, as they seek to maintain occupation of their buildings.

Residential rental rates have started showing more pronounced declines in H1 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 percent in some cases since the start of the year. However, the market average decline is actually around 5 percent over the past six months.

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.

© The Peninsula 2016