The first quarter 2019 review issued by leading regional consulting firm ValuStrat reports continuation of overall correction phase where prices have become more competitive. Residential capital values and rents weakened and office rents continued to favour tenants. Falling Average Daily Rates (ADRs) have given rise to occupancy in all hotel categories. Industrial storage rents in the industrial sector decreased marginally.
Pawel Banach, MRICS – ValuStrat’s General Manager, Qatar commented “…Prices and rents continue to fall, however, the rate of adjustment is slower, indicating they have reached a more representative level in several areas of Qatar. Competitive prices can partially explain the jump in transaction volume by 20% annually this quarter. Existing and upcoming supply in 2019 will entail further softening of prices, ensuring Qatar remains a buyer-friendly market over the next quarters of 2019. In a bid to entice tenants and buyers, a range of attractive incentives were offered by landlords. Furthermore, the recent law amendment of expanding freehold ownership in residential and commercial sectors have provided further incentives to foreign owners to have outright property ownership in Qatar”…
Qatar’s ValuStrat Price Index (VPI) for Residential Capital Values is a 100-point valuation-based index with its base set in Q1 2016, stood at 73.4 points. Countrywide residential capital values declined by 18.3% compared to the same quarter two years ago, down 9.9% YoY and 2.2% QoQ.
The average capital value of a residential unit stood at QAR 8,186 per sq m. More specifically, apartments were QAR 11,934 per sq m and villas stood at QAR 6,320 per sq m. Compared to the previous quarter, apartment capital values softened by 0.8%, whereas villa values fell 2.5%. Villas in West Bay Lagoon, Al Waab, Fereej Soudan, Ain Khalid Abu Hamour, Duhail and Muaither and Al Kharaitiyat experienced quarterly declines up to 10%.
In the residential rental market, the downward pressure on rents witnessed throughout 2018 carried over to Q1 2019. Citywide residential asking rents declined 10.3% over the past 12 months and 2% since the fourth quarter of 2018. Secondary apartment and villa locations such as Al Wakrah, Al Khor, Muraikh, Old Airport, Al Gharrafa and Umm Salal Mohammad experienced annual rental falls of up to 10%.
“Capital values of villas in Ain Khaled declined 6% quarterly, however, its rental values dipped 1% causing gross yields to elevate to 3.8%. In Zig Zag Tower, capital values and rents declined by 4% and 0.6% respectively YoY leading to a gross yield of 6%. Overall gross yields increased to 5%. This trend is expected to prevail throughout 2019…” says Anum Hasan, Senior Market Research Analyst at ValuStrat.
Residential supply reached 293,000 units as of Q1 2019 with the delivery of 3,000 apartments and villas in The Pearl, Lusail, Abu Sidra, Al Wukair, Baaya, Al Hilal and Sakhama. Projected completion for the remaining quarters of 2019 has been adjusted to 10,000 units, 67% of which is planned for Lusail and The Pearl.
200,000 sq m Gross Leasable Area (GLA) was completed during Q1 2019, making the total office stock 4.34 million sq m GLA. Upcoming construction projects until 2020 comprise of 1.4 million sq m GLA, 55% of which will be developed in Lusail. Falling rents in prime locations induced lower rents in secondary locations such as Al Sadd (QAR 90 per sq m) and Grand Hamad Avenue (QAR 90 per sq m) which experienced highest quarterly fall in rents this quarter. Rent-free periods up to 5 months (minimum two year contract length) and inclusion of utilities were commonplace.
The hotel sector saw the first quarter of 2019 ending with 27,474 hotel rooms with the unveiling of Mandarin Oriental (Mushiereb), Dana Al Sadd (Al Sadd), VIP hotel (Umm Ghuwailina) and Dusit Doha (West Bay). Visitor arrivals recorded at 376,000 till February 2019, up by 8% YoY. As hotel operators reduced room rates to attract more guests, the Average Daily Rate (ADR) declined 6% YoY for the first two months of 2019, a result of which led to hotel occupancy increasing to 67% from 60% last year, and there was a 3% annual rise in occupancy for hotel apartment to 76%.
Qatar’s organised retail stock remained at 1.8 million sq m GLA by the end of Q1 2019. An estimated 185,000 sq m GLA from four shopping centres are in pipeline for 2019. Average occupancy across malls was estimated at 80%, however, the performance of older and newly completed shopping malls might come under pressure due to upcoming retail supply. Additionally, average rents in Doha street retail remained stable at QAR 200 per sq m.
Industrial storage space exceeded 12 million sq m GLA with 40% concentrated in the Old Industrial Area. An estimated 650,000 sq m GLA of warehousing space was projected for completion during remaining quarters. Median monthly asking rents for dry storage fell to QAR 36 per sq m, down 2% QoQ. Average asking rent for cold storage leased on per unit basis ranged from QAR 8,000 to QAR 14,000 per month for sizes of 50-80 sq m.
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About ValuStrat Qatar
ValuStrat Qatar is a QFC licensed firm and is part of ValuStrat, a leading consulting group providing Advisory, Valuations, Due Diligence, Research & Industrial Consulting across a diverse range of industry sectors since 1978. ValuStrat has served over 1000 corporations, ranging from government and large multinationals to local corporations, family businesses and SMEs. Some of the key sectors serviced by ValuStrat include real estate, hospitality, retail, education, healthcare, FMCG, manufacturing, entertainment, energy and transport. ValuStrat’s real estate and asset valuation divisions are regulated by RICS.
About the ValuStrat Price Index
The ValuStrat Price Index for Qatar’s residential capital values is a valuation-based index constructed to represent the quarterly price change experienced by typical residential units within Qatar. The VPI applies weighted averages using data samples representing influential locations across the city and is built by our expert RICS Registered Valuers.
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