26 October 2016
By Satish Kanady / The Peninsula

DOHA: The office market segment in Qatar’s real estate sector continued to struggle over the summer months as demand has been largely limited to the private sector, while demand from the government and hydrocarbon sectors remains subdued, DTZ’s third quarter market report on Qatar noted yesterday.

DTZ estimate that between 65 percent and 75 percent of occupiers in the prime office locations are either oil and gas companies or government related. Recent government cutbacks following the fall in oil prices have resulted is a significant fall in overall demand for offices, however there is currently a public tender to secure 25,000 sq m of office accommodation for Qatar Petroleum to cater for their joint venture with French company Total.

The fall in demand for offices, combined with the completion of new buildings has resulted in an increase in availability rates in West Bay to approximately 17 percent. Quoted rents have, on average, reduced by between 10 percent and 15 percent for most buildings in West Bay, as landlords compete for tenants. There is currently a total supply of 1.63 million sq m of office space in West Bay, of which almost 300,000 sq m is available to lease.

DTZ expects that the QP district will add more than 200,000 sq m to this supply, however uncertainty remains as to how much, if any, of this be available to lease in the coming years. A number of new office buildings are also nearing completion in Lusail, which when complete, will see a significant increase to the existing supply of approximately 90,000 sq m. In total, DTZ estimates that up to 2 million sq m of new office accommodation is planned for Qatar within the next decade, most notably in Lusail Marina District, Energy City, West Bay, and Msheireb.

In DTZ’s opinion this is likely to increase vacancy rates, and potentially lower rents, unless there is significant uptake in demand from both the public and private sectors in the next five years. The majority of enquiries for new office accommodation in recent months have been from private sector tenants, with the requirements predominantly relating to space of less than 500 sq m. Demand from the public sector remains limited, in comparison to pre-2015 levels.

Grade A offices in West Bay currently command between QR130 and QR220 per sq m per month depending on the size of units and quality of the building. Higher rents (per sq m) can be achievable for small units in prime buildings. More typically, rents of between QR130 and QR170 per sq m are being quoted for larger office floorplates. Rents in areas such as Old Salata, Al Sadd, Airport Road, and C/D Ring Roads typically command between QR110 and QR160 per sq m per month, depending on the age of the building and the standard of internal finishing.

© The Peninsula 2016