Splash the cash

Orlando Crowcroft finds Qatar’s retail market is creating a lot of work for contractors, but asks whether it is sustainable?

With the focus on football stadiums, roads and rail, it is easy to overlook the massive development going on in other sectors in Qatar, including residential and retail, as the country looks to life post-FIFA 2022.

But the launch of the $824 million Mall of Qatar at last month’s Cityscape Qatar, however, will have done much to emphasise the importance of non-football related projects for those looking for work in the years ahead.

As many as 12 new mega-malls are under construction in Qatar in 2013, with total stock likely to grow to 22 by end of 2015. This amounts to an expected gross leasable area (GLA) of 1.3 million m2, according to estimates by Alpen Capital – translating to a massive amount of potential for contractors.

“The retail market in Qatar is rapidly maturing at a very fast pace, and these proposed new ‘mega-malls’ will change the face of Qatar retail,” said Andrew Williamson, head of retail, MENA at Jones Lang LaSalle.

“There will potentially be many new brands and entertainment options in Doha. Qataris have been travelling to Dubai, Bahrain, Abu Dhabi and other countries to shop, and now they want that experience at home.”

Indeed, the Gulf retail market has almost single-handedly kept demand for luxury goods alive during the last five years of  downturn, with the sector growing by 30% in 2011 – streets ahead of the 11% rate of growth seen globally in these tough financial times.

Qataris are the first among the GCC pack, with oil and gas revenues and a ballooning gross domestic product seeing the average national spending more than $5,000 a month on luxury products. Much of this cash, however, is spent in the shops of New York and London – as well as neighbouring Dubai – and not at home in Doha.

In light of this, new mega-malls seem like an attractive prospect and, as a result, developers are having fewer problems securing finance. The developer behind Doha Festival City – which is set to house Qatar’s first IKEA – earlier this year revealed that it had raised a $1 billion loan from a consortium of Qatari banks.

Lenders in the region a certainly feeling flush, according to data from Boston Consulting Group released in June. The firm estimated that Middle East banks saw a 6.9% increase in average revenues and an 8.1% rise in profits in 2012. Qatari banks were the biggest winners, seeing revenues grow by 12%.

Meanwhile, UrbaCon Trading and Contracting’s (UCC) announcement that the Mall of Qatar – due to add 162,000m2 of GLA to Qatar’s retail stock – was on schedule for completion before 2015, came with bullish pronouncements on the future of Qatari retail from its deputy managing director, Shem Kray.

“We are launching the Mall of Qatar at a time when there is clearly enormous untapped demand for quality integrated shopping, dining and entertainment facilities in the country,” he said. “Our research has shown there is a significant amount of capacity that has to be met in the retail area and our mall will be a major step in fulfilling demand.”

But just how sustainable will Qatar’s retail sector remain as such huge projects enter the market? In a recent report, property consultancy DTZ concurs that demand at present is healthy. Qatar’s Villaggio Mall has expanded regularly since opening in 2006 and benefits from a footfall of some 1.3 million people, a figure that has risen every year. Meanwhile, Ezdan Mall, which opened in April 2013, is 95% fully leased even though a large percentage of the shops are yet to open. Rents too are healthy.

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