Google, Microsoft data centre projects to boost Qatar’s IT sector: Cushman & Wakefield
The proposed data centre projects by Google Cloud and Microsoft Azure under the Qatar Free Zones Authority (QFZA) will not only allow the public sector and private companies, especially financial services to become more efficient compared to their global peers, but will also boost Qatar’s IT sector. The high-profile move which is expected to further attract foreign investment into the country, may also result in a higher demand for office space, Cushman & Wakefield has said in its First Quarter (Q1) Real Estate Market Review. In its latest report, the global real estate services firm said that Qatar’s commercial office market is yet to be fully affected by the COVID-19 pandemic. Except for a reduction in the number of new enquiries for office accommodation since mid-March, the initial impact of Covid-19 on the commercial office market has been limited to date.
That is mainly due to activity in the sector being driven by lease events such as lease expiries, which still need to be acted upon. In general, the lockdown has not affected the commercial office market as much as the retail sector. Tenants are still able to access their offices, subject to government guidelines of reduced staffing and hours; therefore, there have not been multiple announcements by landlords on rent relief. Some prospective new office occupiers are now considering serviced office options instead of conventional office accommodation, as a shortterm measure, while market uncertainty prevails.
The total supply in the office market is now approximately 4.9 million sqm, with the prime sector accounting for 49 percent of this space. The vacancy rate has increased to over 30 percent in prime office districts, largely due to the increase in new supply in Lusail and Msheireb over the past 12 months. As for Qatar’s hospitality market overview, the report reiterated that tourist arrivals in February 2020 exceeded those of 2019 both by air and sea. Unfortunately, the enforced government restrictions on international travel into Qatar resulted in a fall-off in arrival numbers from March 17. Hotel performance figures during first quarter will not capture the impact of the Covid-19 pandemic on the tourism sectors. The hospitality sector was the first to feel the implications of the Covid-19 measures in both room bookings and restaurant revenues. Long term residential lets at the hotels with serviced apartments helped mitigate the revenue hit to some degree.
The pandemic is also affecting the construction sector, which is likely to result in fewer hotels than expected being delivered this year. According to the National Tourism Council’s 2019 report, last year saw continued growth in the sector, with a 9 percent increase in occupancy rates, despite the increase in overall supply. Visitor numbers reached 2.14 million, up 17 percent from 2018. This included a 98 percent growth in visitors on cruise ships, a key growth market in the tourism sector. Hotel supply increased to 27,261 keys in 130 establishments by January 2020, a 6 percent increase on the previous year. The market is dominated by five-star brands, which make up 56 percent of the overall supply.
There are currently 107 hotel and hotel apartment buildings under construction in Qatar, which will provide 21,577 additional rooms. This will bring total supply to almost 50,000 rooms by 2022, a figure which will be supplemented by floating hotels and cruise ships for the 2022 FIFA World Cup. Average Daily Rates in Qatar’s hotels fell by 2 percent in 2019 reflecting increased competition and better value available in the market. The increase in occupancy last year, and a reduction in ADR’s reflected an overall increase in Revenue Per Average Room of 7 percent. The improving performance will undoubtedly be interrupted in 2020 by the COVID-19 epidemic, with uncertainty prevailing about how and when the hospitality sector can fully recover.
One of the retail segments which has been performing well in Qatar during the COVID-19 pandemic is the supermarket sector and certain parts of the F&B sector. Omni-channel F&B outlets have been able to manage the transition better than others, while the other retailers and malls have been adjusting to enable their online and phone ordering sales channels. To deal with the crisis, support measures have been announced by government and private entities, varying from three to six months’ rent relief. Some landlords have also granted their F&B tenants relief from rent and service/utility charges until further notice. The report added that while rent relief has been welcomed by tenants throughout the market, other operating costs cannot be serviced by sales revenues this time, which is raising questions about the number of retailers that may struggle to remain open in a prolonged lockdown.
Qatar’s residential real estate sector is still active despite the COVID-19 restrictions, the report added. Residential leases continued to expire, with renewals and relocations driving the market activity. Some residential occupiers are using this time to take advantage of the recent fall in rents to upgrade their current accommodation. Despite the support measures introduced by the government, employers in some industries have been forced to furlough staff, reduce salaries, or in some cases make people redundant. While no official policy has been introduced on residential rent relief, some residential landlords have started negotiating with tenants on deferring rental payments or granting temporary discounts.
The Supreme Committee for Delivery & Legacy (SC) recently announced that individual landlords or companies who own multiple, adjacent, fully furnished units within villa compounds, apartment blocks or mixed-use schemes would potentially be able to avail of a five-year lease with the SC with a start date of either January 1, 2022 or August 1, 2021. This is likely to prove attractive to many landlords given the pipeline of new supply. The SC has set out strict requirements relating to quality and specification, which should help to improve overall standards when these properties return to the market after the World Cup.
By Lani Rose R Dizon / The Peninsula
Source: The Peninsula Qatar