Qatar retail sector likely to face oversupply

Qatar’s retail sector is likely to face supply glut with the smaller malls downing their shutters, but views are divided on whether the excess supply may lead to softening of rentals. At present, Qatar, which is already witnessing exponential expansion in expatriate population in view of the robust infrastructure upgrade drive, has more than a dozen operational malls with another dozen in the pipeline. By the end of 2015, the anticipated net leasable area (NLA) will be nearly 10.2 million sqft. Upon completion of all the under-construction malls, the total number of malls would be 27 with an expected NLA of 19.3 million sqft.

Retail development is the second largest construction activity after residential development in Qatar. According to the valuation and research department of Al Asmakh Real Estate Development Company, major activities in Qatar’s retail real estate, which is on the bottom of the recovery cycle, would be managed from the malls by 2018. Mall density as proportion to population is also set to increase.

Unlike the commercial office sector, the overall occupancy level is genuinely high in retail segments, corroborating the optimism in the retail sector. At present, organised retail space in Qatar offers nearly 3,068 sqft for every 1,000 people, which would reach 9,688 sqft upon completion of all under-construction malls. Dubai currently offers 14,854 sqft of retail space per 1,000 people, whereas, in the US, the ratio is 11,087 sqft per 1,000 people.

Within Qatar, the retail market can be segmented into four basic zones – malls, souqs, hypermarkets and unorganised shops, Al Asmakh said, adding unorganised retail secures 70% of total retail space; although, no further supply can be expected as per Doha town planning scheme.

Qatar’s economy is estimated to grow 7.7% next year and 7.5% in 2016 mainly powered by the non-hydrocarbon sector, services and construction in particular, according to official figures. The Ministry of Development Planning and Statistics, in its Qatar Economic Outlook 2014-16 Update, had said vigorous investment spending, expansionary fiscal stance and rising population will continue to spur the robust broad-based growth in the non-hydrocarbon sector.