Commercial real estate developers in Doha are banking on a pick-up in demand for office space in the medium term, despite the collapse of the market elsewhere in the Gulf
Although Qatar’s gross domestic product is predicted to grow by 14 per cent this year, supply of office space has outstripped demand, as companies review the expansion of their operations due to the global economic downturn.
With a number of major new office tower developments due for completion in Doha in the next two years, developers are asking themselves whether Qatar will be flooded with new office space it does not need, or whether demand will pick up in 2010.
The total office stock in Doha is estimated by US real estate consultant DTZ to be 3.2 million square metres (sq m), of which 955,000 sq m was added in 2009. About 20 towers are under construction and will add some 450,000 sq m of office space on completion in 2011.
3.2 million sq m - Total estimated office stock currently available in Doha
14 per cent - Forecast growth rate of Qatar’s gross domestic product in 2010
DTZ reports in a Qatar market overview published this month that demand for office space in the prime location of the diplomatic district is steady. Whereas in 2008 companies seeking offices in the district were not always able to find suitable space, this is no longer the case.
Lower demand for office space in general has created a two-tier market in Doha, in which high-quality office space in prime locations can command prime rates of QR240 ($66) a square metre a month. In secondary locations rates range from QR100-150 a sq m. “As the market has continued to mature, greater levels of stock have provided potential occupiers with a choice and resulted in the development of a two-tier office market,” reports DTZ.
However, this has not stopped some developers from building new office space as they anticipate a pick-up in demand in the medium term. The $2bn Al-Waab City development, for instance, a project being developed near Salwa Road by the local Al-Waab Development Company, will add significantly to Doha’s office space. Of the 1.2 million sq m under development, 230,000 sq m will be office space when completed at the end of this year.
The local Barwa Real Estate Company – a subsidiary of Qatari Diar Development Company – also has a number of commercial real estate projects under way. The largest is the $1.4bn, 695,000 sq m Barwa Financial District, being built in the West Bay area of Doha. The development includes nine office towers of between 19 and 52 storeys in height, and is scheduled for completion by the end of 2012.
Barwa’s Commercial Avenue development in south Doha will have 150,000 sq m of office space. Aimed at Qatar’s young entrepreneurs and investors, the project is located between the Mesaimeer roundabout and the industrial area.
The least advanced of Barwa’s major commercial real estate projects, the Al-Sadd mixed-use development, also includes an 18-storey office tower. Formerly owned by the Qatar Real Estate Investment Company, the project calls for the design and construction of an office tower with a built-up area of 23,235 sq m, comprising a three-level basement car park, ground floor reception and mezzanine floor for offices.
The local HBK Contracting Company was awarded the engineering, procurement and construction (EPC) contract to build it in late 2007. Completion is due during the first quarter of 2011.
Demand for corporate headquarters is high in Qatar. Key institutions including Qatar Petroleum (QP), Qatar National Bank (QNB), Qatar Islamic Bank (QIB) and Qatar International Islamic Bank (QIIB) have all commissioned new, flagship head offices.
As part of its plans to consolidate its Doha-based staff in one location, QP is building a head office to the north of Doha. The 540,000 sq m development includes a main office tower and a series of interconnected, mid-rise office buildings that will accommodate about 3,000 staff. A contract award is expected in the second quarter of this year, with completion expected in 2014. The US’ Skidmore Owings & Merrill is the architect.
QNB’s new headquarters will be a 101-storey building facing Doha Bay in the centre of the Corniche area. The built-up area of the landmark tower will be 80,000 sq m. Nine contractors have submitted bids for the $700m scheme and a contract award is imminent.
“The fundamental drivers behind real estate values are beginning to re-emerge”
Report by US real estate consultant DTZ
QIB’s new headquarters will be smaller, at 35 storeys. Three firms have bid for the consultancy contract and the tower is scheduled for completion in late 2012. QIIB’s 45-storey new headquarters is at a more advanced stage. Local firm HBK Contracting was awarded the EPC contract to build it in September 2009.
With such major Qatari institutions pushing ahead with projects to build new headquarters, confidence in Qatar’s commercial real estate sector is growing. “We expect that the fundamental drivers behind real estate values are starting to re-emerge and that, over time, this will lead to a stronger, more resilient property market in Qatar,” DTZ’s report concludes.
Construction companies bidding for contracts to build new office space in Qatar will be hoping that the completion of a string of landmark office towers this year will turn the small Gulf state into a magnet for other firms seeking headquarters in the Middle East.