Some 180 towers are forecast to be completed within the next three years in Doha’s West Bay business and commercial district. This will hopefully provide relief to the overcrowded Qatari commercial real estate market.

“Doha is experiencing significant frustrated demand for office space, with supply lagging by as much as 18 months. Vacancy rates are currently less than 1%,” Colliers International reported in the second quarter of 2006.

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Colliers – a leading real estate company that is expanding across the Middle East – says that current office space in Doha was estimated at 330,000 square metres (m2), including secondary space in locations such as Salwa Road, Al Sadd and the city centre. It forecast gross leasable area (GLA) of 500,000m2 by 2010. New office space in the West Bay alone will add some 300,000m2 of GLA by 2010.

Shortage of office space has lead to large hikes in prices in the commercial sector. Kuwait-based Global Investment House noted in September 2006 that it did not expect a correction in commercial prices and rents in the near future.

“The commercial situation is bad – vastly expensive and hardly anything available on the market,” one western expatriate, a resident of Doha for several years, commented. His office rent had increased by 37% since August 2005.

High occupancy

“The office market is under-supplied, which has resulted in a market driven by landlords rather than tenants. Occupancy rates are currently at more than 95%,” says Colliers International Middle East director Stuart Gissing. “In the absence of the need to compete for tenants, property owners have been able to provide minimum standards of finish, specifications and service, perhaps in the knowledge that tenants would accept this as the norm with little alternative option. They have also been able to demand high rentals.”

Problems are exacerbated by shortages in construction materials. Building materials are in high demand, leading to lags in cement supply. Analysts say that in 2005, Qatar was third in the world cement consumption rankings, absorbing some 2.4 tons per head.

In September, the government passed a decree exempting cement and reinforced steel imported into Qatar from non-GCC countries from customs duty.

There have also been worries over shoddy construction standards – two towers on the Corniche intended for a major Qatari energy company caught fire twice within the space of six months this year.

Teething trouble

John Harris, an emerging markets expert at Jones Lang LaSalle, says: “Commercial space is still scarce, and there are very few opportunities in Class A office towers. As many of the new buildings are being developed by groups with limited experience in workplace and urban issues, there are often shortcomings in parking and amenities that can mean some of the new products just don’t work for multinational users.”

With a correction in commercial sector rents not expected for 18-24 months at the earliest, office rents are running at Qr150-Qr250 per m2 ($40-$70 per m2), according to Mr Harris.

“There are vacant office spaces in Doha – a number of towers in West Bay have floors to let, but these are buildings where potential tenants are put off by unrealistic rents or by infrastructure issues,” says Mr Gissing. “It is well known that parking is an issue in West Bay, and prospective tenants are beginning to reject buildings that do not employ careful planning.” He added that the highest rates were in the West Bay area, ranging from QR200-QR220 per m2 per month.

The situation may improve after the December 2006 Asian Games, although Commercial Bank of Qatar’s head of property business Steven Flint says: “The Games will not have much of an effect on commercial rents and prices. There may well be a hardening of rents in the first half of 2007 but after that we should see a softening as more space comes onto the market.”

Salvation ahead

Several mixed-use developments should ease the situation in years to come.

The new Lusail city is already on the market and has attracted wide interest according to its developer, Qatari Diar. Launched in December 2005, Lusail is a

35-square kilometre development north of Doha, which will eventually accommodate 200,000 people in 10 districts. Its second phase, Fox Hills, will include commercial, residential and civic facilities in 400 land plots, with an initial 140 plots for sale. Four to seven-storey buildings are planned for both sides of the district, creating more than 550,000m2 of office space. Prices for the undeveloped plots are reportedly running from Qr550-Qr750 per m2 in the marina district to Qr6000-Qr8500 per m2 in the high-rise area.

Two major projects due for completion in 2009 are the 80-storey Dubai Towers-Doha, which will include 29 floors of office space. Backed by a company affiliated to the Dubai government-owned Dubai Holdings conglomerate, its developers say it will be the tallest building in Doha.

The Gate is another mixed-use development offering 55,000m2 of office space in two connected buildings, and 24,700m2 of retail and entertainment space.

Retail is a sector forecast to do very well in Doha. “We believe that shopping malls have tremendous opportunity in Qatar given the current scenario of the economic boom in the country,” GIH said in a recent analysis of Qatari property trends.

New space

According to Simon Thomson, head of Retail International, Qatar has some 390,000m2 of retail space, with another 235,000m2 estimated to be ready by 2010. The possibility of oversupply “remains to be seen but Doha certainly has the spending power”, says Mr Thomson. “The tourist market is going to be opened up and it will emulate Dubai somewhat.”

Doha’s mega-reclaimed-land development, The Pearl-Qatar, backed by the United Development Company (UDC), has also earmarked large areas for retail – although UDC’s chief communications officer Roger Dagher says that “all of The Pearl’s retail space is for lease, not sale”. About 600,000m2, including about 800 outlets, has been devoted to retail, leisure and restaurant space on The Pearl.

The Pearl-Qatar says that of the available retail space, a substantial amount has already been committed or is in the final stage of negotiation. “We have attracted top-name brands and upmarket retailers. This shows that The Pearl-Qatar is certain to become a future destination for world-class shopping experiences for residents and visitors alike,” says Hussam Ahmed, The Pearl-Qatar’s general manager.