Quarterly Report Qatar Q3 2020: Retail Market Overview
The supply of organised retail accommodation in Qatar has doubled in the past five years
There is currently in the region of 1.3 million sq m of gross leasable area in Doha’s 18 largest destination malls, with overall supply in Qatar, including small neighbourhood malls, now more than of 1.5 million sq m. Organised retail supply has increased by more than 100% since 2015, with Doha Festival City and Mall of Qatar providing almost half a million sq meters of leasable accommodation.
Cushman and Wakefield estimates that there is currently 575,000 sq m of GLA presently under construction in six retail developments, which will open over the next three years. The recent increase in retail accommodation has transformed Qatar’s organised retail real estate market from being undersupplied to being oversupplied, which has impacted on occupancy rates and rental values.
A survey undertaken by Cushman & Wakefield in 2020 indicated that occupancy rates in Qatar’s main retail malls had fallen to an average of 83%; however, occupancy rates vary significantly between malls, with the most successful developments still enjoying full occupancy and strong footfall.
Q3 saw the introduction of Phases 3 and 4 of Qatar’s re-opening following the COVID-19 enforced lockdown measures earlier in the year. The third phase of re-opening, in August, saw a return to full opening hours in malls. While the fourth phase of re-opening in September saw the opening of restaurants for dine-in customers, entertainment and recreation zones remain closed until further notice.
The impact on retailers saw unprecedented relief measures granted to tenants while malls were closed. Unfortunately, some retailers and restaurants did not re-open following the enforced shutdown; however, businesses that survived will hope to return to full capacity as shoppers return to malls.
While rental levels have softened in 2020, the retail landscape has been characterised more by incentives such as rent-free periods and fit-out contributions, rather than significant falls in headline rents. While this reduces the net effective rent over a defined lease term, headline rents remain somewhat protected.
New demand for retail accommodation has been subdued in Q3, due to prevailing market conditions and economic uncertainty, both in Qatar and internationally. Given current vacancy rates and upcoming supply, Cushman and Wakefield expect rental levels to fall over the coming years unless there is a substantial uplift in new demand in 2021 and beyond.
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