Qatar's retail space set to expand

 

With Qatari residents benefitting from one of the world’s highest levels of GDP per capita, and enjoying the resultant disposable income, demand for new retail space has reached historic highs. The retail segment is set to welcome more than 1m sq metres of net leasable area (NLA) before 2020, adding much-needed space to a fast-growing market, with long-term sustainability expected on the back of strong population growth and a consumer preference for high-end facilities.

CURRENT SUPPLY & RENTS: Qatar is currently home to 13 shopping malls, with existing supply at 629,000 sq metres of gross leasable area (GLA). Doha’s City Centre accounts for 20% of this supply, followed by Villaggio, at 17% and Porto Arabia, at 15%, according to a June 2014 report by Colliers International. In its own report from mid-2014, Al Asmakh Real Estate Development Company highlighted that Qatar’s retail market is expected to become a centre of investment in the coming years, owing to high occupancy rates, longterm tenant commitments, and reasonable rental rates.

Average rents in Doha’s top-three shopping malls – City Centre, Villaggio and Landmark – stand at about QR310 ($85.12) per sq metre, according to Al Asmakh, which reports 90% occupancy rates in prime locations. Outside of the big three, Al Asmakh reports that rents vary between QR210 ($57.67) and QR250 ($68.65) per sq metre, while Colliers International reports that average line rentals at Doha’s malls in run from QR180 ($49.44) and QR275 ($75.53) per sq metre each month.

EXPANDING DEMAND: With Qatar’s population tripling over the past decade, rising from 744,029 in 2004 to 2.26m in December 2014, and GDP per capita approaching $94,000 in 2013, according to the World Bank, demand for new retail space has been high. Standards set by the International Council of Shopping Centres indicate that developed communities can absorb 2 sq metres of GLA per person. Using these standards, and discounting blue-collar workers from the equation, Colliers International estimated that Doha can absorb a supply of 700,000 sq metres of formal shopping space.

According to Al Asmakh, an additional 14 shopping malls are planned for Doha in the next three years, which will bring more than 1m sq metres of NLA to the market, almost tripling the size of the sector. By 2016 the market is expected to comprise more than 1.7m sq metres of shopping space. Notable among these are the Mall of Qatar, Doha Festival City, Place Vendome, and Marina Mall (see Retail chapter).

“There are a number of new malls under development, and I think it is sustainable if population growth continues at current rates. I expect we will see rental rates coming under pressure, and malls will need to be better-designed to meet shoppers’ needs, offering the right tenant mix and sufficient parking,” Mark Proudley, associate director of real estate brokerage, consultancy and research firm DTZ, told OBG.

RETAIL SPACE: The Mall of Qatar, located in the Al Rayyan district in northern Doha, is scheduled to open in the first quarter of 2016. The facility sits on a 500, 000-sq-metre plot alongside a 2022 FIFA World Cup stadium, offering 195,000 sq metres of shops, with space for 20,000 shoppers and 7000 vehicles. The project’s budget as of December 2014, excluding land prices, stood at QR4bn ($1.1bn). Designed and developed by UrbaCon, with officials announcing that retail space was more than 70% leased as of October 2014.

Doha Festival City is another sizeable retail project currently being advanced, and expected to open in September 2016. The QR6bn ($1.64bn) project will add 244,000 sq metres of GLA to the market, housing 550 outlets including 85 restaurants and an entertainment zone with a snow park, as well as 8000 parking spaces.

Place Vendome, a QR5bn ($1.37bn) mixed-use development in Lusail, will offer 230,000 sq metres of retail space with capacity for 400 stores when it opens in 2017, while the Marina Mall, also in Lusail, will add 70,000 sq metres of GLA. “Marina Mall is being built for a price of QR1bn ($274m). The enabling works have been completed and tenders for the main contractor are open,”

Hamad bin Ali Al Hedfa, CEO of Mazaya Qatar, told OBG.

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The Report: Qatar 2015

Real Estate chapter from The Report: Qatar 2015

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