Qatar: Sales set for a surge

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Qatar’s retail sector appears well-placed for solid growth over the next few years, with prospects looking even brighter in the medium term as the economy is expected to gain further momentum as a result of the government’s investment programme and the feel-good factor leading up to hosting the 2022 FIFA World Cup.

The International Monetary Fund (IMF) forecasts an expansion in Qatar’s GDP of up to 18% this year, and the state is committed to a huge investment programme that will see tens of billions of dollars flow into the economy through new projects, most of which are aimed at improving the nation’s infrastructure, diversifying the economic base and boosting employment.

With per capita GDP the highest in the world at more than $86,000 a year – a figure that is set to grow as the economy continues to expand – Qataris are in a strong position to spend. Local retailers should be buoyed by a groundswell of consumer confidence to accompany the continuing increase in discretionary spending power, with two recently released reports showing that optimism is on the rise.

According to the latest quarterly consumer confidence survey conducted by online job site, in conjunction with research specialists YouGov Siraj, Qatar’s consumers are increasingly positive in their outlook, a confidence that is expected to be translated into higher spending in the country’s shops. The study found that 55% of Qatari respondents felt the local economy would be even stronger in a year’s time, with just one in 10 believing it will worsen in 2011. Some 50% believe their financial position will improve this year and 52% are confident the employment market will strengthen during the next 12 months.

These findings back up an earlier survey, the MasterCard Worldwide Index of Consumer Confidence issued in December. The study found that Qatari consumers were among the most positive in the region, with their expectations for the coming six months growing in line with the health of the economy. Qatar was ranked second on the index for the first half of 2011, behind only Saudi Arabia, while its overall rating on the index of 83.6 was well above the regional average of 71.6.

The survey also found that there was an across-the-board increase in consumer confidence, with all five indicators covered by the study pointing to a sharp improvement in sentiment, with the quality-of-life index up from 57.5 six months before to just under 90. The survey showed similar trends for confidence regarding regular income and employment opportunities, the former rising from 47.1 to 86.4 and the latter up to 92.1 from 85.5, all solid portents of higher spending.

The expected jump in demand is feeding growth in shopping supply, with a steep rise in retail space coming onto the market over the past year. According to a report released by property consultancy Colliers International at the end of 2010, the total gross leasable area (GLA) available to the retail sector in Doha topped 630,000 sq metres, up by some 30% since 2009.

This demand-supply imbalance will be eased over the next two years, with Colliers estimating that GLA will increase to 760,000 sq metres by the end of 2012 as a series of new developments open their doors. This will go some way to addressing one of the few problems Qatar’s retailers face, with the increased floor space on offer expected to push down rental prices. At around $660 per sq metre a year, they are currently some of the highest in the region, despite an 8% reduction in 2010.

Rental costs could start to climb again as the World Cup comes closer, with demand for premium space expected to heat up as the tournament approaches. When drafting their medium-term plans retailers will have to factor in a probable dip after the World Cup winds down and fans leave town.

Qatar’s retail, hospitality and tourism sectors have already been given a small foretaste of what to expect in 2022. They enjoyed a brief boom in January when the nation hosted the Asian Cup, which saw supporters of the 16 qualifying teams arrive in the country. However, as successive sides were knocked out the number of foreign sports fans staying in Qatar’s hotels and shopping in its malls and boutiques dwindled.

Though there will undoubtedly be some deflation for the sector following the World Cup, this should not be too extreme, as the expected expansion of the domestic economy and population growth should soak up the increased retail capacity and keep the tills ringing long after the final whistle in 2022.

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