*Over time, oversupply in the office sector has been increasing, as observed by increasing vacancy rates in office buildings witnessed since 2016, ValuStrat said.
The gap between demand and supply of office space may amount to more than 1mn sq m gross leasable area (GLA), researcher ValuStrat said and noted the influx of supply is more than an increase in demand.
Over time, oversupply in the office sector has been increasing, as observed by increasing vacancy rates in office buildings witnessed since 2016, ValuStrat said.
Due to falling rental rates across office buildings in prime districts such as West Bay and Lusail Marina, there has a been shift in demand from secondary locations to prime districts.
As of H1 2020, the supply of office space was 5,060,000 sq m GLA. As per ValuStrat research, 60% of existing office space is of Grade-A.
There was an addition of seven office buildings and four mixed-use buildings during H1 in Lusail (Marina and Energy City), Najma, Fereej Bin Omran, Abu Hamour, Al Wakrah, Al Wukair and Umm Salal comprising 220,000 sq m GLA.
Upcoming projects in 2020, currently under development totalled 580,000 GLA, 48% of which are located in Lusail (Fox Hills, Energy District and Marina District) and Al Dafna and whereas the remaining projects are located in Duhail, Nuaija, Al Hitmi, Al Sadd, Umm Ghuwailina and Al Muntazah.
As of Q2 2020, the median asking rent for office space fell by 1.2% QoQ, 4.7% over six months and 12.8% YoY, ValuStrat said.
The highest fall in office rents during H1, 2020 was experienced in office buildings across C/D-Ring roads.
Offices along C-Ring road quoted rents ranging from QR60-QR110 per sq m while offices along D-Ring road have asking rents ranging from QR70-QR130 per sq m depending on size, quality and furnishing of the commercial spaces offered.
Rent-free periods of up to two months (differing contract periods) were commonplace in the area.
“We observed a trend of more significant declines in rents within secondary locations (despite no significant supply additions in the area) compared to prime locations,” ValuStrat said.
Al Sadd also experienced an estimated 5% fall in average rents over six months during H1.
The majority of the office space in Al Sadd had asking rents ranging from QR55-QR90 per sq m, although some buildings also quoted rents of up to QR140 per sq m.
Rent-free periods of up to three months (differing contract periods) were also common in the area.
“We observed some offices in Al Mansoura and along Al Nasr street offering up to six months rent-free periods with a minimum three to six years contract. Smaller office spaces were readily available everywhere except in West Bay, where the option was available, however, in lower quality relatively older office buildings,” ValuStrat said.
Offices offered for sale in Lusail at an average rate of QR20,000 per sq m (QR1,858 per sq ft) and in West Bay at QR16,250 per sq m (QR1,510 per sq ft), the researcher noted.