New report says apartment supply is also expected to increase significantly in next 12 months, adding downward pressure on rents
Prime residential apartment rents in Qatar have fallen by between 5-10 percent over the past year, according to a new report by DTZ.
Rents for mid-range units did not drop as much but DTZ said it is anticipated that they may soften further in the third quarter as new supply comes to the market in areas such as Bin Mahmoud and Al Mansoura.
Prime residential apartment supply is also expected to increase significantly over the coming year, with more than 3,000 new units nearing completion in West Bay, and The Pearl-Qatar, the Q2 2016 Qatar market report added.
It is likely that new supply will see rents continue to soften, reversing the trend of high increases experienced between 2011 and 2015, DTZ said.
The report noted that there has been a continued fall in demand for corporate residential lettings for apartment blocks and compounds with more companies now preferring to provide rental allowances rather than paying for employee accommodation.
DTZ said that while the population of Qatar increased by some 9 percent over the past 12 months, the vast majority of new arrivals have been made up of construction workers.
While this has kept the tertiary sector buoyant, demand for prime and mid-range residential accommodation has fallen due to a significant exodus of white collar workers following recent redundancy programmes in the government and hydrocarbon sectors.
DTZ's research team also identified a reduction in Grade A office rents of between 10-15 percent since the start of the year with the majority of enquiries being for space of less than 250 sq m.
Office supply in West Bay currently stands at almost 1.7 million sq m, with approximately 0.25 million sq m currently available to lease. By 2017 it is estimated that a further 385,000 sq m will be added to the Grade A office market, according to DTZ.
The report said vacancy rates of Grade A office accommodation in West Bay have increased by approximately 5 percent over the last six months, resulting in opportunities for tenants with lease events to negotiate advantageous terms.
Mark Proudley, director, Consultancy and Research, DTZ, said: "The current rental softening reflects market driven supply and demand and provides some relief to occupiers from rents which have been rising year on year since 2010.
"The long-term trajectory for Qatar remains good with the government's significant infrastructure investment, valued at QR261 billion ($71.68 billion), providing welcome and fundamental support to the wider real estate economy... I am confident that Qatar's RE market will start to feel some of the positive effects of this spending."