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29th May 2008, 11:49
THE trend of rising rents - both residential and commercial - looks set to continue for years, a market analyst has said.
Over the last year house rents have increased more rapidly than those for commercial establishments, observers point out.
The prospect for the coming year is no better. “Both (rents for houses and commercial establishments) will continue to increase”, Reg Barichievy, general manager of Colliers International Qatar, a global real estate major, told Gulf Times.
Asked why “for rent” signboards have suddenly gone up, he said: “This is not an evidence of increased supply and, therefore, an indicator that rental rates are about to soften”. It is rather a measure of increased competition among agents as well as increased professionalism on the part of landlords.
According to research by Colliers International, the average rent of a middle market, two-bedroom apartment (semi-furnished) has increased from QR6,000 a month to QR7,500 over the last year. The rent for an up-market three-bedroom apartment has increased from QR19,000 per month to QR19,750.
There is still a waiting list for apartment buildings, and individual apartments are still being taken up within days of becoming vacant. When apartments fall vacant the rent is usually increased, although sitting tenants who renew their leases can sometimes renegotiate at the same rent, because of the Rent Law restrictions.
The situation with villas is similar, with the average three-bedroom market rents having increased from QR13,000 per month to QR15,000. The average rents for up-market villas have increased from QR20,000 per month to QR28,000 over the last year.
The rents for villas in middle market compounds have increased from QR9,000 per month to QR 13,000. And average rents of villas in the up-market compounds have increased from QR15,000 to QR25,000.
“This increase in rentals has continued despite the increasing number of residential developments which are coming onto the market”, Barichievy observed.
According to his research, there is still a shortage of supply in the market, and demand has been driven further by the estimated 457,000 new residents who arrived in Qatar last year.
“This being the case, there is no reason why rentals should come down over the next year”.
There are several residential units under construction, but if the population growth continues at the same rate as last year it will be several years before supply exceeds demand.
Office rents also continue to rise, although there seems to be some consolidation in the increase in rents, the study shows.
Over the last one to two years rents moved from QR200/m² to QR250/m² for new A Grade office premises.
“There is limited evidence of rentals having reached and exceeded QR300/m² in West Bay but it is too early to say that this can be accepted as the new benchmark. It depends on the negotiating strength of the parties. There is evidence that landlords of large buildings who have demanded rentals in the QR300/m² range have accepted considerably less when leasing the entire building”, Barichievy said.
This offers no comfort to the lower end of the market where tenants are looking for premises of 150m² to 250m². These are generally in short supply or unavailable and the asking rentals for B Grade premises can easily be QR220m² to QR250/m².
The office towers of West Bay, which can be expected to have the greatest short-term impact on the market are still under construction and will only be ready for occupation from the end of 2008.
This will free up secondary office space in the rest of the city but the pent up demand for office accommodation, as with residential accommodation, is so great that the vacancies are likely to be taken up immediately.
Many businesses are still occupying residential villas because of the lack of purpose-built office accommodation
Over the last year house rents have increased more rapidly than those for commercial establishments, observers point out.
The prospect for the coming year is no better. “Both (rents for houses and commercial establishments) will continue to increase”, Reg Barichievy, general manager of Colliers International Qatar, a global real estate major, told Gulf Times.
Asked why “for rent” signboards have suddenly gone up, he said: “This is not an evidence of increased supply and, therefore, an indicator that rental rates are about to soften”. It is rather a measure of increased competition among agents as well as increased professionalism on the part of landlords.
According to research by Colliers International, the average rent of a middle market, two-bedroom apartment (semi-furnished) has increased from QR6,000 a month to QR7,500 over the last year. The rent for an up-market three-bedroom apartment has increased from QR19,000 per month to QR19,750.
There is still a waiting list for apartment buildings, and individual apartments are still being taken up within days of becoming vacant. When apartments fall vacant the rent is usually increased, although sitting tenants who renew their leases can sometimes renegotiate at the same rent, because of the Rent Law restrictions.
The situation with villas is similar, with the average three-bedroom market rents having increased from QR13,000 per month to QR15,000. The average rents for up-market villas have increased from QR20,000 per month to QR28,000 over the last year.
The rents for villas in middle market compounds have increased from QR9,000 per month to QR 13,000. And average rents of villas in the up-market compounds have increased from QR15,000 to QR25,000.
“This increase in rentals has continued despite the increasing number of residential developments which are coming onto the market”, Barichievy observed.
According to his research, there is still a shortage of supply in the market, and demand has been driven further by the estimated 457,000 new residents who arrived in Qatar last year.
“This being the case, there is no reason why rentals should come down over the next year”.
There are several residential units under construction, but if the population growth continues at the same rate as last year it will be several years before supply exceeds demand.
Office rents also continue to rise, although there seems to be some consolidation in the increase in rents, the study shows.
Over the last one to two years rents moved from QR200/m² to QR250/m² for new A Grade office premises.
“There is limited evidence of rentals having reached and exceeded QR300/m² in West Bay but it is too early to say that this can be accepted as the new benchmark. It depends on the negotiating strength of the parties. There is evidence that landlords of large buildings who have demanded rentals in the QR300/m² range have accepted considerably less when leasing the entire building”, Barichievy said.
This offers no comfort to the lower end of the market where tenants are looking for premises of 150m² to 250m². These are generally in short supply or unavailable and the asking rentals for B Grade premises can easily be QR220m² to QR250/m².
The office towers of West Bay, which can be expected to have the greatest short-term impact on the market are still under construction and will only be ready for occupation from the end of 2008.
This will free up secondary office space in the rest of the city but the pent up demand for office accommodation, as with residential accommodation, is so great that the vacancies are likely to be taken up immediately.
Many businesses are still occupying residential villas because of the lack of purpose-built office accommodation