Q1 2016 Real Estate Market Review - Qatar Increase in vacancy rates - - PowerPoint PPT Presentation

Q1 2016 Real Estate Market Review - Qatar

Increase in vacancy rates in the office and residential sectors

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Q1 2016 Real Estate Market Review - Qatar

• Qatar’s economic reliance on the hydrocarbon

sector has resulted in further cuts to government spending in Q1 2016, as oil prices fluctuated between $38 and $42 per barrel in March.

• The Standard & Poor’s (S&P) credit ratings

agency recently confirmed Qatar’s AA rating and stable outlook. S&P noted that Qatar’s macroeconomic fundamentals remain solid despite the challenges the state is facing. The international credit rating agency warned however, that the government’s balance sheet will deteriorate as long as oil prices remain subdued.

• Despite the fall in oil & gas revenue, major

infrastructural projects are progressing as planned, maintaining economic growth. The current cost of projects that are underway is QAR261bn, which excludes projects in the energy and private sectors.

Economic Overview

Macro Economic Trends Nominal GDP and Real GDP Growth

0% 5% 10% 15% 20% 25% 30% 35% 40% 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 % QR Million Nominal GDP (Oxford Economics) Qatar Real GDP Growth

Brent Crude Oil (Price per Barrel $)

10 20 30 40 50 60 70 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16

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Q1 2016 Real Estate Market Review - Qatar

Residential Market

Prime Apartment Supply Trends in Residential Market Prime Apartment Rents

• The supply of new residential accommodation

has increased in recent months and this trend will continue throughout the year as a significant number of apartment projects reach completion.

• Recent redundancies in the government and oil

and gas sectors has resulted in a slowdown in demand in the past 12 months.

• The increase in supply and reduced demand has

resulted in increasing vacancy levels for primary and secondary apartment market. The changing dynamics in the market suggest that recent signs

• f falling rents in the apartment sectors may

continue throughout 2016.

• Construction of new villa compounds throughout

Doha has been limited in comparison to apartment buildings. While there has been an increase in vacancy levels, DTZ believe that

• ccupancy rates for compound villas will remain

relatively high, with less downward pressure on rental levels.

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2012 2013 2014 2015 2016 2017 2018 2019 2020

• No. of Apartments

Diplomatic District Pearl Lusail Msheireb

5,000 7,000 9,000 11,000 13,000 15,000 17,000 19,000 21,000 2011 2012 2013 2014 2015 Q1 2016

QAR per month

One Bed Two Bed Three Bed

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Q1 2016 Real Estate Market Review - Qatar

Office Market

Supply and Vacancy Trends in West Bay

New Demand Registered by DTZ 2014 v 2015

Prime Office Rents by District Trends

• Grade A offices in West Bay currently command

between QAR 150 and QAR250 per sq m per month depending on the size of units and quality

• f the building. Typically, rents of between

QAR150 and QAR180 per sq m are being quoted for larger office floorplates.

• Downsizing, and significantly reduced demand

from government and oil and gas sectors, has resulted in new buildings been made available to lease, with availability levels increasing for the first time since 2010.

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Const Fin Serv Tech Govt Oil&Gas Prof Serv Misc 2014 2015

0% 5% 10% 15% 20% 25%

• 200

400 600 800 1,000 1,200 1,400 1,600 1,800 2009 2010 2011 2012 2013 2014 2015 Q1 2016 Diplomatic District Availability 100 130 160 190 220 250 280 310 2010 2011 2012 2013 2014 2015 Q1 2016 Diplomatic District - Prime Diplomatic District - Average Airport Road C/D Ring Road and Al Sadd

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Q1 2016 Real Estate Market Review - Qatar

Hospitality Market

Hotel Supply Pipeline of Hotel Supply Room Keys by Rating (20,713 keys) Trends

• 15 new establishments opened in 2015,

increasing room supply to over 20,700.

• 88% of supply is classsified as either 4 Star
• f 5 Star
• Overall occupancy rates fell from 73% in

2014 to 71% in 2015

• ADR dropped by 5.7% to QAR 520, while

RevPAR fell by 8.8% to QAR 370

10,000 20,000 30,000 40,000 50,000 60,000 70,000 2010 2012 2014f 2016f 2018f 2020f No of Rooms

20 40 60 80 100 120 140 2010 2011 2012 2013 2014 2015

• No. of Hotels

2-star 3-star 4-star 5-star

1% 11% 38% 50%

2-star 3-star 4-star 5-star

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Q1 2016 Real Estate Market Review - Qatar

Retail Market

Prime Retail Rents Accommodation by Mall (643,000 sq m) Trends in Retail Market

• Organised retail supply currently totals almost

643,000 sq m across 14 malls

• High occupancy rates and strong demand from
• retailers. This has led to rental increases in

prime retail malls over the past 12 month

• DTZ estimates that there is currently more than

1.3 million sq m of organised retail accommodation under construction in Qatar

City Centre Landmark Hyatt Plaza The Mall The Centre Royal Plaza Centrepoint Villaggio Lagoona Mall The Gate Dar A Salam Mall Ezdan West End Mall Gulf Mall

50 100 150 200 250 300 350 2009 2010 2011 2012 2013 2014 2015 Rent QAR Per Sq M Shopping Mall Headline Retail Rents Showroom Rents

Project Location Estimated Completion Date Mirqab Mall Al Mirqab Street 2016 Al Hazm Mall Markhiya 2016 Doha Mall Abu Hamour 2016 Katara Mall Al Qassar 2016 Tawar Mall Duhail 2016 Mall of Qatar Al Rayyan 2016 Doha Festival City Umm Salal 2017 Northgate North Doha 2017 Place Vendome Lusail 2017 Marina Mall Lusail 2018

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Cityscape Qatar 2016

Land Market – The Macro Economy

Macroeconomic Factors Affecting Land Transactions The Price of Oil

• Brent Crude has fallen from $65 to $40 per barrel year on year and from $114 in June 2014
• Reduced government spending on non-essential projects
• Investors more cautious given the economic climate

Source: Bloomberg Brent Crude

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Cityscape Qatar 2016

Land Market – The Macro Economy

Macroeconomic Factors Affecting Land Transactions Equities Markets

Source: Bloomberg

• Qatar Exchange Index has fallen from 11,900 to 10,300 year on year
• FTSE 100 Index has fallen from 6,900 to 6,400 year on year, after crossing 7,000 in April 2015

Qatar Exchange Index

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Cityscape Qatar 2016

Land Market – The Macro Economy

Macroeconomic Factors Affecting Land Transactions Credit Availability

Financial institutions are:

• Reducing exposure to riskier assets
• Reducing Loan to Value (LTV) ratios
• Protecting their balance sheets
• Following enhanced Qatar Central Bank (QCB) and Basel III regulations
• Overall more cautious approach to lending

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Cityscape Qatar 2016

Land Market – What Are We Actually Seeing

Macroeconomic Influence of Land Transactions

20 40 60 80 100 120 50 100 150 200 250 300 350 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

QEI 00' / Brent Crude USD bbl Number of Land Transactions Month

Land Transactions - QEI - Brent Crude

Land Transactions QEI Brent

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Cityscape Qatar 2016

Land Market – What Are We Actually Seeing

Ministry of Justice Land Transaction Analysis

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2,000 4,000 6,000 8,000 10,000 12,000 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

• No. of Transactions / Average Price (QAR psm)

Total Value of Land Transactions (QAR Millions)

Qatar Land Transactions - Q2 2011 to Q1 2016

Total Value (Millions) No of Transactions Average Price PSM

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Cityscape Qatar 2016

Land Market – What Do We Forecast

Looking Forward

• Land values to stabilize overall with a reduction in some districts
• Speculative purchases to reduce
• Land to remain as a long-term store of value for local investors especially given the

uncertainty in the wider financial and commodities markets

• Reduced income growth impacting end values and ultimately the residual value of land

leading developers to reduce the amount they are willing to pay for land