Rental level in the country’s commercial office segment fell by about 30% since 2016 due to the increasing supply of commercial office spaces coupled with weakened demand, KPMG in Qatar has said in a report.
This index trend is expected to continue over the short-to-middle term as more office developments reach completion in Lusail, West Bay, and Musheireb. However, a significant drop in rentals is not expected soon, KPMG said.
The report said the real estate market in Qatar is slowly entering a stabilisation mode with affordability being a prime theme across asset categories. This rising affordability coupled with business-friendly government initiatives can help strengthen the demand in the market.
Anurag Gupta, director and head (Real Estate) at KPMG in Qatar said, “With the recent large project announcements, it is clear that Government spending has moved beyond FIFA-related expenditures and the bulk of spending is shifting towards upgrading the core infrastructure of the country”.
The latest KPMG Qatar Real estate Rental Index showed that the third quarter and fourth quarter of 2019 for commercial offices witnessed a cumulative drop of 3.4% on the rental index compared to 2% during the initial two quarters of 2019.
Qatar’s retail market has experienced a further drop of 3% over the last two quarters of 2019 compared to 2% witnessed during the initial two quarters of the same year. The decline is reflective of the existing oversupply along with growing vacancy in the market.
However, interestingly, the retail segment continues to be the best performing asset category in Qatar with a decline in overall rentals by just 11% since 2016.
“Lastly, with the influx of retail malls in Qatar slated to open over the short to middle term, we foresee the mall rental index to experience a further decline. However, a subsequent demand from the retailers could help mitigate the drop-in rentals further,” KPMG noted.