Doha lacks affordable real estate, retail space

The housing market in Doha is undersupplied by as much as 40,000 units, one of the Gulf’s largest real estate consultancies has said.

With more than 142,000 residents and just 102,000 properties available, Qatar’s capital city is a profitable market for developers, said Colliers International analyst JP Grobbelaar.

“The residential sector has traditionally been undersupplied and it remains undersupplied in the overall sense,” said Grobbelaar. “The high end of the market is becoming saturated. Developers have been focusing on this area because this is where the larger profits lie.

“The truth is that the greatest demand for residential space comes from the expatriate population, which is far bigger than the local population. So as the expatriate population is growing so is demand for mid high-end properties, things like townhouses, villas and apartments. That is an area of the market which could quite lucratively be looked at by developers inside and outside of Doha.”

Qatar’s retail market is also hampered by a lack of supply, said Marwan Shehadeh, group director at Al Futtaim Capital, which is currently building Qatar’s largest mall.

Despite good purchasing power – according to Credit Suisse Bank, the per capita income in Qatar is estimated at $10,9000 – the retail market currently spans 630,000m sq of gross leasable area (GLA) against a capacity of 1,000,000 m sq.

“We believe there is a gap in the Doha market today, and a strong demand for proper, super-regional, retail and entertainment destinations,” said Shehadeh. “Qatar is currently probably the richest city in the world and yet it doesn’t have world class retail destinations.”

In the commercial sector, Doha has seen rates for A-grade office space fall by as much as 15 percent in the last year. Margins are likely to be further squeezed with the addition of another 200,000m sq of office space scheduled to come on line in 2011.

In the hospitality sector, much depends on the success of Qatar’s bid to host the 2022 FIFA World Cup. Currently the market is “heading for huge oversupply” according to Grobbelaar, with another 4,200 hotel rooms slated for delivery by 2012.

Average room rates in Doha have dropped 17 percent since 2009 while revenue per available room has declined by almost a third.

“I think there are still people in the country looking at investing in this direction [hospitality],” said Ayman Al Barqawi, Qatar resident director for Arabtec.

The construction firm has three ongoing projects in the country worth a combined QR4bn (about $1.09bn).

“I can’t say there isn’t oversupply because the rates are coming down but I think the market here will absorb that oversupply quite quickly. I think the country will cope with the oversupply. There is still confidence in the market,” Al Barqawi said.