- In the retail sector, heightened competition, driven by the growing prevalence of e-commerce, is reshaping consumer behaviour.
Qatar - The tourism sector in Qatar continues to experience substantial growth, with 143% increase in visitor numbers during the initial nine months of 2023, reaching 2.8 million compared to the same period last year, as per Knight Frank's latest report, Qatar Real Estate Market Review – Autumn 2023.
Despite the increased influx of tourists, hotel performance indicators faced challenges in 2023. The average ADR decreased by 3.4%, while average occupancy declined by 5.4%, resulting in an 8.6% decrease in RevPAR, primarily due to a significant surge in hotel supply during 2022 and the first nine months of 2023.
Faisal Durrani, Partner – Head of Research, MENA, explained: “The overwhelming success of the 2022 FIFA World Cup put Qatar in the global limelight and the benefits are slowly starting to crystalise, especially for the tourism market.
“During 2022, 7,200 keys were added to Qatar’s hotel inventory, with a further 1,200 rooms being added this year. This takes the total supply to just over 40,000 keys. Critically, occupancy levels for the first nine months of 2022 have averaged 54%. Not only is this down on the 57% average recorded over the same period last year, but Qatar is the only GCC nation register a decline in occupancy levels between 2022 and 2023, highlighting the challenge for developers eager to plan for the coming visitor boom”.
Turab Saleem, Partner – Head of Hospitality, Tourism and Leisure Advisory, added: “Developers and hotel operators have a fine balance to achieve between maintaining high occupancy levels and not stifling the market with extra supply. Partnering with the government to understand its growth targets and ensuring the correct hospitality, entertainment and entertainment infrastructure is in place will help to deliver more sustainable growth in the long term, just as we have seen play out in other major markets across the Middle East, including Riyadh and Dubai.”
The revenue projections for the travel and tourism market paint a positive picture, expected to reach US$ 510 million in 2023. The sector is anticipated to demonstrate an annual growth rate (CAGR 2023–2027) of 11.5%, solidifying Qatar's position as a dynamic player in the regional tourism landscape.
Knight Frank’s report also investigates the performance of the residential market, where sales prices for apartments have slipped by 2.8% over the last 12-months, while villas have expanded by 1.5% over the same period.
Adam Stewart, Partner – Head of Qatar, commented: “What is noteworthy is the fact that while overall transaction volumes are down 18% in the last 12 months, the overall value of deals is up 12%, highlighting the affordability challenge in the market. Clearly, the rise in the headline interest rate from 5% at this time last year, to 6.25% today is only exacerbating matters”. (TBC)
Doha and Al Daayen municipalities, for instance, witnessed substantial price growth of 58% and 46%, respectively, over the last 12 months, despite a decline of 37% and 38% in the number of transactions in these districts.
Al Rayyan and Doha municipalities recorded the highest volume of residential transactions during the third quarter, showcasing continued interest in these areas.
However, the oversupply of residential properties in Qatar persists, leading to a decline in prices. Villa rental rates dropped by 6.5% to an average of QAR 1,625 per month. The average villa selling price decreased by 2.5% in the past 12 months, settling at QAR 7,100 per square meter in Q3 2023, with West Bay Lagoon commanding the highest sales price.
For apartments, the average rental value declined by 9.2% over the last 12 months to QAR 10,900 per month, while the average transacted price experienced a 3% decline, settling at QAR 13,780 per square meter. Different districts showcased varying price dynamics, with Fox Hills recording the lowest sales price and West Bay Lagoon commanding the highest price per square meter.
The oil and gas industry, in conjunction with the government sector, remains at the forefront of driving office activity, marked by relocations to Lusail in recent transactions.
Moreover, as of Q3 2023, the existing office supply totals 5.5 million square meters, mainly comprising Prime and Grade A office stock. Projections indicate an anticipated increase in supply to 5.7 million square meters by 2025, with a concentration of forthcoming supply in Lusail, including Fox Hills, Energy City, Commercial Boulevard, and the Marina District.
Despite constant demand these sectors, the Qatari office market's challenge lies in an oversupply of office space, leading to declining rental rates. The monthly Grade A office rental rates declined by 3.3% in the last 12 months, averaging QAR 81 per square meter.
Steward added: “With Grade A supply forecast to climb to 5.7 million square metres by the end of 2023, from 5.5 million square metres today, landlords need to be wary that it is very much a tenants’ market.”
In Qatar's retail sector, the demand from retailers is on a declining trend, primarily attributable to the substantial increase in supply in recent years. Monthly retail rental rates have experienced a 3% decrease, with an average of QAR 186 per square meter over the 12-month period concluding in Q3 2023.
The retail environment is witnessing heightened competition as e-commerce becomes more widespread, and consumer expectations change. Retail developments that offer a unique consumer experience, integrating elements like public spaces, dining choices, and entertainment, have consistently upheld high occupancy rates.
As Q3 2023 concluded, the existing retail supply measures at 1.7 million square meters, with a predominant presence of regional malls. Projections foresee an anticipated expansion in supply, reaching 2 million square meters by 2025.
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