The recent invitation issued to contractors to build an Olympic venue at the Lusail City development is the latest sign that Doha’s sporting ambitions have given fresh impetus to the state-backed real estate scheme.

In April, the Qatar Olympic Committee invited contractors to express interest in building the Al-Thumama sports hall, a 19,000-seat venue proposed for Lusail City. The facility will be used to support Qatar’s plans to host the Olympic Games in 2020. With the largest football stadium for the Fifa World Cup in 2022 also planned in the same area, Lusail City will form a crucial part of Doha’s development plans over the next decade.

With the new supply coming online and lots more planned, Qatar will need to be careful not to overbuild

Regional real estate analyst

The $20bn Lusail City was unveiled during the Gulf’s real estate boom in 2004 and promised to be one of the most exciting mixed-use developments in the region. The first infrastructure contract on the scheme was awarded in 2006. But the collapse of the region’s real estate market after the global economic crisis in 2008 caused the scheme to stall for the next four years.

Renewed impetus

The project was revived after Qatar won the right the host the 2022 football World Cup in December 2010.

“There has been considerable progress on the Lusail City development in recent years,” says Hamad Ali al-Abdulmalik, Lusail projects director, at Lusail Real Estate Development Company (LREDC).

“The earthworks for the project have been completed and construction is well under way on the city’s extensive infrastructure, including access roads, underground parking and utility tunnels, as well as Lusail’s marinas.”

Located 22 kilometres north of Doha, the scheme covers a total area of 35,000 square kilometres and is planned to accommodate 200,000 residents. State-backed Qatari Diar set up LREDC as a subsidiary to develop the project in 2008. German contractor Hochtief was assigned to provide planning and construction services.

Lusail City is scheduled for completion in 2020 and will feature residential clusters, commercial districts, shopping and leisure facilities, 22 hotels and two golf courses. The masterplan divides the waterfront development into 19 integrated and mixed-use districts. The Lusail development will also include Qatar’s Energy City, which is planned to become the country’s oil and gas administrative hub, with more than 80 energy sector offices planned.

The majority of the Lusail scheme is to be developed by private organisations with LREDC providing the infrastructure.

“Lusail offers investment and development opportunities to public and private, local and foreign companies. We are already working with a number of private developers in different districts throughout the development,” says Al-Abdulmalik.

Since December 2010, there has been a push to move forward with the construction of infrastructure  needed to support the various real estate projects planned.

“The major infrastructure contracts that were recently awarded are part of the significant steps that Lusail has been taking towards completing Qatar’s new progressive city. We continue to work on our carefully-planned timeline to have all of the city’s main facilities and features in operation for the World Cup,” says Al-Abdulmalik.

Infrastructure progress

Already this year, Samsung C&T has been awarded three infrastructure packages on the Lusail development. In January, the South Korean contractor won a $296m contract to build primary infrastructure, which will include the construction of a 10.7km-long road.

In April, Samsung was awarded two further deals to build six bridges, highways, underground motorways and electricity distribution plants for the project. In the same month, German consultancy firm Dorsch Gruppe was awarded a site construction supervision contract for 11 separate construction packages.

The developer has also tendered two other infrastructure packages since the start of 2012. One of the biggest contracts is construction package four, also known as CP4. It involves building two sections of connecting road, for a total length of 5.2km with six lanes. The submission date for the infrastructure package is 21 May.

The second contract tendered was a utilities package, also known as CP6B. The work includes building a bridge approach ramp, telecommunications and electrical systems. Bids have already been submitted and the client is currently considering submissions.

The long-awaited Lusail Expressway project is also expected to gather pace this year. The 16-lane highway will link the Lusail City development with central Doha. The scheme has suffered delays in the design and tendering process, having originally been due to be tendered in August 2010.

Qatar’s Public Works Authority (Ashghal), the client for Qatar’s major road projects, is expected to award the estimated $989m first package by the end of June. It will involve building a section of the expressway from the Arch roundabout to the area surrounding the scheduled Ritz Carlton in Doha. Construction is expected to take 36 months to complete.

The 12km-long second package on the expressway scheme, which has not yet been tendered, will run beside Lusail City and then onto the Pearl real estate development.

Rail connection

In addition to the road network, the Lusail development will also include a light-rail transit (LRT) system. The LRT will be 30km in length and will contain 25 overground passenger stations and eight underground stations.

In February, Qatar Railways Company (QRail) signed a QR1.95bn ($537.7m) contract with the local/French Qatari Diar Vinci Construction (QDVC) for civil engineering works on seven underground stations and construction of a viaduct.

QRail is still evaluating proposals for the rolling stock contract after bids were submitted in June last year. Parsons International and Aecom, both from the US, are providing project management and consultancy services for the LRT scheme.

Although the completion of the infrastructure schemes is a primary objective in 2012, construction of the Lusail marina is already ready and work on some of the real estate components is now under way.

“The city’s marina district has witnessed the most progress and the first phase of infrastructure construction was completed in 2010. The marina towers can be seen rising up from the construction site as work continues,” says Al-Abdulmalik.

The Lusail marina is the first phase of the development. In addition to the marina, it will contain residences, offices and hotels that will be fronted by a waterfront boardwalk. It will cover a total area of about 2 million square metres and is planned house about 80,000 people. The marina area will contain 102 towers, which will range in height from 15-40 storeys.

In March, Lusail municipality approved the designs for the estimated QR1bn marina mall project, which were drawn up by the London office of US-based architect HOK.

The mall will have gross leasable area (GLA) of 60,000 sq m and will be built over three levels, which will include a 10,000 sq m hypermarket on the basement level. The mall will also contain restaurants, a cinema complex and spa facilities.

The project is being developed under a 20-year build, operate and transfer (BOT) agreement between Qatar Foundation and the local Mazaya Qatar Real Estate Development (Mazaya).

The UAE’s Damac Properties, meanwhile, is working on its Business Square office project at the marina district of the Lusail development. It awarded the local Draieh Contracting the main construction package for the project in April last year. Damac has also appointed the local contractor to build its Piazza 1 and Piazza 2 residential buildings at the Fox Hills district in Lusail, another area of the real estate scheme which has witnessed accelerated progress in the past year.

“Access has been granted in the Fox Hills district and Energy City to facilitate early development of infrastructure and buildings. Work in the Fox Hills district has moved into its second phase,” says Al-Abdulmalik.

The Fox Hills district will cover a total area of 1.6 million sq m and will house up to 39,000 people in four-to-seven storey buildings, which will be spread across more than 370 plots. The district will also contain a media city, a 200-bed general hospital, 36 schools and 35 mosques.

Oversupply concerns

As with other major real estate projects planned in Qatar, concerns have been raised over the long-term demand for the Lusail City scheme.

Its development follows the construction of the Pearl Qatar, another ambitious waterfront real estate scheme that will house up to 45,000 residents when complete. Despite its vast wealth, Qatar has a modest population of approximately 1.8 million people, which is expected to remain flat in 2012.

“With the new supply coming online and lots more planned, Qatar will need to be careful not to overbuild. We saw what happened in Dubai when developers got carried away,” says one regional real estate analyst.

Despite several new real estate projects planned in Qatar, there is little evidence of a significant increase in property demand. Residential rental rates remained flat for the first quarter of 2012, while office rates are expected to dip in the short-to-medium term due to oversupply, according to real estate advisory CBRE.

Strong demand for residential leasing was reported at the Pearl Qatar suggesting that there is appetite for high-end property. Prices on the development reflect this. 

However, LREDC is confident that Qatar’s sporting plans will raise international interest and investment in the country’s property sector. “The World Cup will bring a fresh wave of interest to Qatar’s real estate and property developments from across the region and abroad, and to Lusail City in particular,” says Al-Abdulmalik.

With a vast expatriate workforce expected to descend on Qatar to build more than $60bn-worth of infrastructure in preparation for the tournament, property developers expect to see a pick-up in demand for accommodation in the next five years.

But many in the region’s property sector say that sustainable long-term demand in Qatar will be dependent on the success of the government’s economic diversification efforts.

“For Qatar, diversification is important. There is a lot of investment to be made in various sectors, such as education. They need to make sure there is something more sustainable after the World Cup,” says Matthew Green, head of research and consultancy for UAE at CBRE Middle East.