CBRE releases its Qatar Real Estate Market Review Q3 2022
Doha – December 8, 2022 – Amidst the increasing global recession fears, Qatar’s economic outlook remains positive bolstered by the increasing level of gas output along with the FIFA World Cup tournament, which will positively influence the overall economy and lead to higher spending.
Looking at the hospitality sector, substantial improvements in Qatar’s selected KPIs have been witnessed in the year to date to October 2022, compared to 2019. Whilst the average occupancy rate dropped by 8.4 percentage points, the ADR has registered an increase of 14.7%, with the RevPAR rate marginally dropping by 0.1%. Conversely, in the year to date to October 2022, the average occupancy rate saw a decrease of 14.6 percentage points. Over the same period, the ADR rate increased by 13.4%, whilst the average RevPAR dropped by 3.2%.
From mid-November to late December, we evidently expect Qatar’s occupancy rate to reach close to full occupancy, given that over 1.2m fans are expected to attend the tournament. In 2022, The country’s aggregate number of hotel rooms stood at an estimated 37,000, with more than 6,000 rooms being added in 2022 according to STR Global. Qatar is expecting 10,799 additional rooms in 2023, where some of this upcoming supply is an overspill from the supply which was expected to be delivered in 2022. Although the industry’s KPIs are anticipated to decelerate post-World Cup, the infrastructure reinforcements undertaken in recent years will likely provide ongoing support to the industry going forward.
The total volume of residential transactions reached 1,119 in the year to date to September 2022, a decrease of 34.9% compared to the same period last year. Both occupiers and investors are delaying purchasing decisions until after the World Cup. For the latter, this period will be particularly relevant due to leasable stock which had been reserved for the tournament being returned to the market. As at September 2022, median apartment prices stood at around QAR 13,400 per sq. m., with median prices varying from QAR 11,900 to QAR 16,100 per sq. m. depending on the location. Amongst the chosen communities, the Pearl registered the highest median sales rate per sq. m. in the apartment segment of the market at around QAR 16,100. Fox Hills, on the other hand, recorded the lowest median sales rate of QAR 11,900 per sq. m.
In the rental market, the median monthly apartment asking rent in Qatar reached around QAR 11,000, with median monthly rents spanning from QAR 9,000 to as high as QAR 14,000 depending on the location. The highest monthly rental rates for apartments were found in the Marina District, where rents reached a median level of QAR 14,000. While the rental market has seen significant levels of demand and strong performance over the course of 2022, this is largely due to the influx seen on the back of the World Cup. As this demand dissipates, we expect that performance in the rental market is likely to begin to moderate over the course of the next year.
While occupier activity has begun to improve in the office sector, given the sharp increase in supply seen in recent years, rental performance has remained subdued over the course of the year. In the year to Q3 2022, average rents in core locations and non-core locations fell by an estimated 6.5% and 10.0% respectively. Looking ahead, given the weakening global economic backdrop, we expect that international occupiers are likely to adopt a more cautious approach to any planned capital expenditure decisions. We therefore expect the market to remain tenant-favored, a fact which is likely to continue to support occupier activity.
Looking at the retail sector, resident-based consumer spending in Qatar is forecast to rise by 4.6% this year. Given the World Cup fever, the economy will continue to profit from increased levels of tourism spending and will likely maintain this traction till the end of the season, which is expected to be reflected positively on the retail segment of the market. Despite higher levels of spending, the retail market is seeing a glut of supply, with the average occupancy rate softening over the course of the year. In terms of average rental rates, as at Q3 2022, super-regional malls asking rents ranging from QAR 300 to QAR 350 per sq. m., whereas regional and community malls ranged between QAR 200 to QAR 250 per sq. m., and QAR 100 to QAR 150 per sq. m., respectively. Given the relatively high vacancy rate, we expect that the market will remain occupier favoured, with landlords expected to continue to offer a range of incentives to drive occupancy.
Taimur Khan, Head of Research – MENA at CBRE, comments:
“The extraordinary growth in Qatar’s built environment over recent years has impacted market performance over this period and this trend has continued in most cases into 2022, where we have seen softening in performance indicators across most sectors. Although we expect, and to a degree have already seen, an uptick in performance in the hospitality and residential sectors around the World Cup tournament, we forecast this trend to ease after this period. That being said, given recently revised real estate regulations, easing of business and new visa regulations, we expect the fundamentals to improve and support the sector’s performance in the longer-run.”