Qatar office property seen to remain stable

By Santhosh V Perumal/Business Reporter

Qatar’s office market, which is set to come out of the recession cycle, is expected to remain “stable” with additional supply presumably to come online by the second quarter (Q2) of 2015, according to Al Asmakh Real Estate Development Company (Aredc).

“The overall outlook of the commercial real estate sector seems to be stable in upcoming quarters as projects, which are under construction, would deliver additional supply presumably after Q2 2015,” said a recent report from Aredc Research and Valuation Department.

Terming the commercial development within Qatar as a strategic move for an investor, it said, the size of a project and ability of its owner to lease out in an open market with projected market rental rates are the keys to success.

The report highlighted that gross annual yield in commercial real estate investment is as high as 7%, however, average yield may be realised at 6.5%.

Buildings, which are newly constructed, may fetch “substantially” lower yield owning to low occupancies, it said, noting that the location, specification, and the maintenance of a building and rents are the driving factors for commercial leasing.

Barwa Commercial Avenue, which is located at the Industrial Area Street, targets those customers who have establishments within Industrial Area and other outskirts of Qatar.

However, due to the massive size of the project and location, Aredc department anticipate its occupancy rate to be on the lower side.

The highest rents are in West Bay offices, starting at QR180 which can go up to QR250 per sq m per month, the report found.

Commercial areas such as C and D Ring roads, Al Sadd, Salwa Road and Doha city centre areas have rents in the range of QR120 to QR160 per sq m per month.

“The rental rates have more or less remained stable since third quarter of 2013; we anticipate the same trend for the upcoming two quarters,” it said.

West Bay is preferred by large local and international corporates as well as government sectors; Grand Hamad Street has a preference mainly from banking and financial institutions.

Mid-size corporates, private holding firms and other business establishments mostly choose C and D Ring roads and Doha city centre areas.

West Bay has the highest number of A-Grade offices with average size of 600sq m. C and D Ring roads accommodate a mix of A-Grade and B-Grade offices with an average size of 310sq m. Doha city centre areas and Airport Road comprise B-Grade and C-Grade offices with average size of 100sq m.

The highest occupancy can be seen in C-Grade followed by B-Grade offices because of lower rents and moderate office, while West Bay has the lowest occupancy since many under-construction commercial projects are kept on hold.

However, due to moderate demand and adequate occupancy, new commercial projects have been launched on C and D Ring roads, the report said.

Nearly 58,871sq m land near Ramada Intersection has been planned, segmented and sold to individual purchasers for commercial developments. About 23 buildings are likely to be delivered with nearly 125,000sq m commercial office space in the next 2-3 years, it said.

With Doha city centre areas planned for future developments; many buildings are scheduled for demolition, hence, their tenants have been changing their offices. Moreover, the businesses that are located in private villas received notifications to relocate to commercially approved places, it found.

“Owing to these reasons, the occupancy level has been increasing in many commercial areas such as in and around C/D Ring Roads,” the report said.