Market Trends of Qatar Commercial Real Estate Industry
Growing Demand for Offices in Qatar
After slowing down in 2020 and 2021, office leasing transactions have picked up in 2022, with a number of leases being signed in the third quarter.There has also been a noticeable rise in the size of office spaces that tenants want in 2022, with a few recent leases being for more than 500 square meters.Recent expansion in the hydrocarbon sector has been behind a recent office acquisition of more than 7,000 square meters and two further lettings in excess of 3,000 square meters. Earlier in the year, a number of government and semi-government agencies announced their intention to relocate to buildings that are under construction in downtown Lusail. While this will ultimately lead to buildings in other locations being vacated, it highlights an increasing trend of office occupiers moving to Lusail. Organizations such as the Qatar Financial Centre and, increasingly, the Qatar Free Zone Authority have been driving demand for office space in the private sector.
QFC currently has more than 60 designated buildings across Doha that house the 1,400 QFC-registered companies. This number is also expected to grow over the coming years. QFZA-designated office accommodation will soon be available to lease to QFZA companies outside of Ras Bufontas, as office buildings within that Free Zone are reaching capacity. An agreement is also in place for QFZA real estate solutions in Msheireb Downtown. To date, more than 300 companies are registered with QFZA, and further growth is expected to create further demand for office accommodation in Doha.
The supply of purpose-built office accommodation in Qatar has now reached approximately 5.3 million square meters. The Al Dafna/West Bay district has the largest concentration of supply, with approx. 1.8 million sq m of gross leasable area in more than 70 buildings. Prime rents for Grade A stock range from QAR 100 to QAR 110 per sq m per month, exclusive of service charges. Office spaces leased as 'shell and core' can be secured for QAR 60 per sq m per month in some of Doha's main office districts.
Increasing Travellers Boosting the Hospitality Sector
In August 2022, the supply of hotel keys in Qatar reached 30,847, of which 75% are hotel rooms and 25% are hotel apartments. Of the available hotel rooms, 65% are classified as 5-star, with less than 10% classified as 3-star or below. In the wake of the FIFA World Cup, held in November 2022, a new supply accelerated. Despite expectations of a sizable number of new hotels opening earlier in the year 2022, the supply of hotel keys only increased by 5% year-on-year by August, which highlights the delays experienced in the construction sector since the outbreak of COVID-19 in 2020.
Hotels and serviced apartments are expected to deliver approximately 37,000 keys, or 45,000 rooms, in time for the World Cup. Demand for World Cup accommodation will dominate the market in the coming months. The Supreme Committee for Delivery and Legacy has reserved 80% of overall hotel supply for the tournament; however, any unrequired supply is expected to be returned to hotels in early October, freeing up rooms for the wider market. According to the latest figures released by the National Tourism Council in September, year-to-date occupancy for the hotel sector has been 57%, with average daily rates recorded at QAR 422
After COVID-19 hurt the tourism industry, the number of visitors to Qatar kept going up in 2022. Year-to-date arrivals have increased by 67.4% in 2021, although arrivals remain significantly below pre-pandemic levels. Estimates of more than 1 million people arriving in Qatar during the FIFA World Cup will ensure that tourist numbers reach unprecedented levels and ensure a boost to annual occupancy and hotel revenues for the year. A recent report by the World Travel and Tourism Council stated that travel and tourism generated QAR 67 billion (USD 19 billion) in 2021, which represented 10.3% of the nation's GDP. The FIFA World Cup tournament provided Qatar with an unprecedented opportunity to drive tourism revenues and promote Qatar's tourism sector. Robust growth in tourism numbers will be required in the coming years to support occupancy rates and revenues as supply continues to grow.
