By Satish Kanady
DOHA: Qatar’s commercial real estate sector witnessed a significant revival this year. The vacancy rates dropped to 10 percent in the much sought-after Diplomatic District reflecting net take-ups of prime office accommodation, which grew at 2.5 times the five-year average during the first nine months of 2013.
The majority of prime retail mall space is fully occupied and headline rental rates have held steady in 2013.
But with numerous shopping malls under construction, the supply of retail space is expected to soon increase, and this has curbed rising rents, Qatar’s updated Economic Outlook noted.
The real estate market has exhibited upward price momentum for over three years, following the setbacks associated with the global financial crisis.
Most of the price inflation is concentrated in the residential segment, especially in the premium tier.
Inflation, as measured by the change in the consumer price index, is expected to average 3.2 percent in 2013, up from 2012’s 1.9 percent.
This pick-up is primarily due to rising rental costs. “Inflationary pressures are unlikely to subside in 2014, and consumer price inflation is forecast to average 3.5 percent. A continuing influx of foreign labour may push rental prices still higher, especially in affordable to middle-income housing, where availability is tighter.
“Brisk, double-digit, expansion in the non-oil and gas economy is expected in both 2013 and 2014. This growth will be broad-based with contributions from construction, manufacturing and services. It will be primed by Qatar’s large infrastructure spending programme, investments in the wider economy and rapid population growth… population could grow from 1.8m at the start of 2012 to about 2.2m by end-2014. New arrivals will boost demand for a raft of non-traded services,” the document noted.
Construction activity is now projected to expand by 13.1 percent in 2013, accelerating to 15.7 percent in 2014.
The government is set to invest heavily in economic infrastructure over upcoming years, particularly local roads, expressways, the Doha metro and rail, and drains and sanitation.
The construction of new health centres and education facilities will also entail heavy spending. Private construction activity centred on residential and commercial real estate development, including new malls, hotels and labour accommodation throughout Qatar, will also fuel growth.
The services sector is expected to be the largest contributor to growth in both 2013 and 2014, and its share of aggregate output will rise sharply.
Financial services are expected to carry on expanding as insurance and Islamic financial services continue to develop, while banking will benefit from the business generated by real estate development and infrastructure projects.
Trade and hospitality are also expected to grow with lively conference activity and an increase in tourist arrivals from within the region.
The opening of Hamad International Airport will provide a boost to a range of logistical and service-support activities.
Manufacturing is also set to expand, but not at the pace of other parts of the non-oil and gas economy, mainly reflecting a projected decline in production of fertilisers, and a levelling-out in production of petrochemicals and refined products in 2014.