Retail on a Roll


Economic News

22 Jul 2010
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While the acquisition of iconic British department store Harrods in May by Qatar Holding – one of the government’s investment vehicles – made international headlines, the country’s domestic retail sector is also very much on the move. Though impressive in themselves, the spate of new developments are less likely to catch the attention of the global media than the $2.2bn Harrods deal, Qatari shoppers are set to benefit from a major increase in retail options, some of which will rival the Knightsbridge emporium for opulence and range.

In the coming years a massive building surge is expected to add up to 400,000 sq metres of retail space to the existing stock, almost doubling the gross leasable area (GLA) in Doha.

Qatar has among the highest retail rental rates in the Gulf region, due to the current gap between supply and demand, with new complexes quickly finding tenants as a result of the ready-made demand existing for retail space, the Alpen report said.

“However, the current robust project pipeline – once completed – will bring some correction in demand/supply mismatch, thereby moderating the rental rates during the coming years. Moreover, as the majority of construction is in premium category malls, a drop in rentals could be more accentuated in this segment,” the study said.

The projected increase in retail GLA is already having an impact on the sector, with rental charges for shopping space falling by 13-23% in the first three months of the year, according to a recent report by international consultancy DTZ.

Though the firm is forecasting a 45% increase in GLA by the end of next year, the report says that in the short to medium term, the organised retail market outlook remains fundamentally sound, with demand continuing to outstrip supply and the growing number of foreign visitors giving a boost to the retail market.

“As a result, vacancy rates are expected to remain low even as retail stock increases and rental growth on new developments, which can add diversity, exclusivity and depth to the retail market, will remain strong,” DTZ said.

That strength was evident last year, with the Alpen report saying that Qatar had bucked the regional trend in 2009, which saw a weakening in the retail spend due to the international financial crisis. With its high per capita GDP translating into high levels of disposable income and strong purchasing power for residents, the global economic downturn had little effect on the Qatari retail sector, the survey said.

With GDP expected to expand by 15% or more in 2010, disposable income levels will likely follow suit, giving Qataris more money in the pocket to spend and a wider range of outlets in which to do so.

However, it is not just domestic custom that Qatar’s retailers are looking to serve, with the government working to increase the number of overseas visitors to the country, many of the new shopping projects are being developed with an eye to the tourism trade. Qatari officials have said they expect tourist arrivals to hit 1.4m by 2011, though this could be affected by a re-emergence of economic woes in some of Qatar’s major source markets,, particularly Europe.

Even with the massive expansion currently under way, GLA in Qatar will remain smaller than in some of its near neighbours, most notably Dubai and Abu Dhabi. More than 1m sq metres of new retail space is scheduled to be added to Dubai’s existing stock by 2012, with Abu Dhabi in the process of building another 700,000 sq metres of floor space. What this means for Qatar is even stiffer competition both for the tourist trade and for leading brand names.

Though Qatar may not get as many overseas visitors as originally envisioned due to the global economic slowdown, local demand should keep the tills ringing at a more than satisfactory rate over the next few years and beyond. With the country’s economy shifting into top gear, and a wider range of retailing outlets lining up to set out their wares, fewer well-heeled Qataris will need to fly to London to experience Harrods-like shopping.

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