Qatar office market to see rent drag ‘for most of 2014’

By Santhosh V Perumal

Business Reporter

Qatar’s office market, which is still in its initial stage of growth and expected to remain stable this quarter (Q4), may see a drag in rents in the coming two to three quarters of 2014, according to Al Asmakh Real Estate Development Company (Aredc).

The current supply of offices, especially in West Bay, C Ring Road, and Barwa Commercial Avenue, may drag office rental rates down in the upcoming two to three quarters, Aredc valuations and research department said in a report.

However, due to on-going and proposed changes in Doha city centre areas, the change of existing business dynamics owing to FIFA World Cup 2022, as well as lucrative opportunities to new businesses within Qatar, in the long-term office market may behave optimistically, it said.

Unlike neighbouring GCC (Gulf Cooperation Council) countries where office and business districts are spread across the country, Qatar has a concentrated office market, which is mainly operated from Doha. Grand Hamad Street can be considered an old CBD (commercial business district) of Doha, while West Bay can be a new CBD.

Nevertheless, the demand for new office acquisition is dependent upon occupiers’ profile, the report said, adding multinational companies tend to take offices in West Bay, whereas local businesses are still inclined towards C and D ring roads, Al Sadd and Airport Road.

Approach to the airport and Industrial Area makes Barwa Commercial Avenue - which accommodates offices, retail shops, residences, a mall and offers 910,000 sq m space - the most desired destinations for larger and medium size businesses, the report said.

Due to premium specifications, offices in West Bay are always in demand. However, due to higher rental and maintenance costs, the occupancy level remains at 65%, Aredc found.

On the other hand, offices located on C Ring Road, Airport Road, Al Sadd and Salwa Road have been attracting new businesses with lower monthly obligation and easy approach to areas surrounding the Doha city centre, it said.

A majority of offices in such locations contain the specification of type B category, though new towers on Suhaim Bin Hamad Road offer type A offices.

The average monthly rental of office spaces in West Bay is nearly QR220 per sq m, C and D ring roads command QR120 –QR150 per sq m and BCA may fetch QR120–QR140 per sq m.

Due to ongoing infrastructure development throughout Doha, many office complexes have been restructured in areas in and around A Ring Road, it said, adding therefore, such business groups have been moving towards C and D ring roads, Airport Road and Salwa Road.

Occupancy level of office spaces in such areas is as high as 80%. Nevertheless, due to premium rents, recently completed towers located in these areas are proving “unsuccessful” in attracting new occupants, the research wing said.

The office buildings in West Bay offer premium facilities to their occupants, however, owing to larger offices with an average size of 600 sq m, an occupier has to pay an average rent of QR132,000 per month.

Offices on C Ring Road can be leased at an average monthly rental of QR45,000. Salwa Road offers smaller size offices at an average monthly rent of QR120 per sq m, therefore, the average rent per month would be QR18,000.

In terms of annual gross yield, office buildings in Al Sadd and on C Ring Road may fetch up to 8%. Similar buildings located on D Ring Road and Airport Road may yield a gross return of up to 7% annually.

West Bay office towers may stretch an average gross annual return of 6% to their owners.

“The highest return can be experienced in those buildings which has medium size offices with proposition of type B category. Such offices are always in demand if their locations are C Ring Road, Al Sadd and Al Dafna,” it said.