Qatar’s organised retail sector has benefited from the country’s high levels of wealth and is currently going through a period of rapid expansion, Oxford Business Group (OBG) said in a report.
The gross leasable area (GLA) in Qatar may have nearly doubled in 2017 alone, thanks to a strong pipeline of mall openings, OBG said in ‘The Report – Qatar 2017’.
In 2017, two of the largest of these, Mall of Qatar and Doha Festival City, opened their doors.
Qatar had a GDP per capita of $59,330 in 2016, the highest in the GCC region and the sixth-highest in the world, according to World Bank data, despite the figure having fallen from $66,346 the previous year due to the decline in international hydrocarbons prices.
Such high levels of national wealth have helped to underpin the development of a strong retail market, and the country registered total retail sales of $12.4bn in 2015, according to AT Kearney, which ranked the country as the fourth-most-attractive retail market in the world in its 2015 Global Retail Development Index, the latest edition in which Qatar was included.
Available retail gross leasable area (GLA) stood at 838,000 sq metres in 2016, up from 643,000 sq metres in 2015, according to figures supplied by DTZ Qatar, the Qatari branch of the international real estate firm. Supply has more than doubled over the past decade or so, from 405,000 sq metres in 2007, OBG said.
Total organised retail GLA in Qatar will rise again during 2018, to 1.8mn sq metres, thanks in large part to the scheduled opening of Place Vendôme, a mixed-use luxury development in Lusail City in September this year.
The rapid increase in organised retail GLA comes at a time when Qatar’s previously rapid population growth is levelling out – the population grew from 1.6mn in 2010 to an estimated 2.7mn in 2016, according to IMF figures, but is forecast by the fund to remain more or less stable over the next five years.
“The very rapid increase in GLA is not in line with the departure of certain sectors of the population, which will represent a substantial challenge for malls and retailers,” Joerg Harengerd, director, City Center Doha, told OBG. “New arrivals have also tended to come from other sectors, so the expatriate profile is changing towards one with slightly lower purchasing power, and many people are coming here with the intention of saving rather than spending money.”
Despite this, Mark Proudley, director, DTZ Qatar, told OBG that there was some justification for the sector’s rapid expansion. “There has historically been an undersupply of retail space in the Qatari market compared to other countries in the region,” he said.
However, rising GLA would create a gulf in prospects between premium and second-tier malls. “From a real estate perspective, the retail market hasn’t really matured as much as other market sectors, and there is a substantial variance in rents and occupancy levels between higher quality malls with better parking, retail mixes, leisure facilities and so on, and the secondary market,” Proudley told OBG.
“While the premium-tier establishments will continue to demonstrate strong performance, we will likely see rents start to fall in the second-tier market in the coming years.”
Sean Kelly, project director, Place Vendôme echoed this prediction. “The value chain will be rebalanced because new malls coming on-line keep raising the bar in terms of their offering, diversification and customer service. It is likely that a hierarchy of malls will develop across the market,” Kelly told OBG, citing a similar dynamic that has already occurred in Dubai.
OBG said retail supply is set to increase dramatically in the coming years in Qatar, leading to a “risk of oversupply and putting pressure” on smaller and less prestigious second-tier malls in particular. Events in the country such as the 2022 FIFA World Cup and the construction of new neighbourhoods in Doha, notably Lusail City, will, however, provide new opportunities for the sector to grow.
“The coming years will show that the well-established, customer-centric retailers who focus on acquiring the right location, size and tenant mix, along with robust management, are the ones who will stay ahead of the game,” Daniel Lattouf, mall manager, Lagoona Mall, told OBG.
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