Cuts in government spending leads to slowdown in commercial, residential lettings

There has been a further slowdown in commercial and residential lettings in Qatar due to cuts in government spending in the first quarter, DTZ Qatar said in its Q1 2016 Market Report regarding the Qatari real estate market.

It is estimated that between 2009 and 2014, as much as 65% of commercial space was accounted for by governmental and semi-governmental entities. However, this demand has reduced significantly in the past 12 months.

“Most commercial real estate lettings are for small office spaces, which are in demand from the private sector,” it was explained in the report released during the Qatar Market Overview, taking place as part of Cityscape Qatar, which opened yesterday.

At the conference, industry experts discussed the challenges, opportunities, and key concerns of the real estate market in an event chaired by DTZ Qatar general manager Edd Brookes.

“While the market report provides an objective view, understanding what the challenges are allows businesses within our industry to make strategic decisions that can sustain their competitive advantage, even in a fluctuating market,” he said.

Population increase, which continues to be fuelled by growth in the private sector, is accounting for demand in low to mid-level residential property, while prime real estate is seeing lengthening voids in some cases. 

Mark Proudley, associate director, consultancy and research, DTZ, stated: “While the real estate market remains in flux, the macroeconomic outlook is solid, according to Standard & Poor’s.  The credit ratings agency recently confirmed Qatar’s AA rating and stable outlook.  However, the waning price of oil continues to threaten the government’s budget. The need to decrease spending is challenged by the requirement to keep pace with developmental requirements ahead of 2022. The current cost of projects underway is QR261bn. This excludes projects in the energy and private sectors.”

With regard to the retail sector, the supply of leasable property in ‘organised’ retail malls is 643,000sq m, with high occupancy rates across sectors.

The hospitality sector is experiencing a decrease in occupancy rates with 15 new hotels and hotel apartment buildings having been opened in the past year.

Currently, supply has reached 20,000 rooms, according to DTZ.