As with many other countries in the Gulf region, Qatar is also investing heavily in its infrastructure, as the gas rich nation strives to transform itself into an arena capable of staging one of the world’s largest and greatest sporting events, FIFA World Cup 2022. 

Consequently, there has been a visible increase in public spending, as the government allocates a considerable share of its budget towards funding new transport facilities, such as high-speed light rail and metro networks.  Clearly this type of investment will have long-term positive repercussions for the country, as Qatar aims to position itself as a new emerging global country and as it strives to create new jobs and diversify its economy.

Such facilities are seen to be primary drivers for real estate growth, with hopes that the increased passenger capacity will help to underpin the entry of new hotel keys, as well as driving more consumers through Doha’s expanding retail sector.

There is a worry that too much reliance in Qatar’s real estate sector is being placed on hypotheticals rather than fundamentals.

However, despite the ongoing development, there is a worry that too much reliance in the real estate sector is being placed on hypotheticals rather than fundamentals, with an apparent preoccupation with development for the World Cup rather than for longer-term goals.  Perhaps the key question that should be asked is: how sustainable will the property market be after the tournament?  At this stage, the signs are arguably pointing towards oversupply.

While Qatar’s diversification strategy clearly goes beyond the 2022 tournament and even beyond the 2030 vision, there is very noticeable drive from the public and private sectors to create world-class facilities in the short term that can ultimately cater to the thousands of visitors expected during the competition. 

The sheer scale of the projects planned for 2022 is a common source of trepidation when discussing the future of Qatar, particularly in the context of oversupply and on-going construction delays that are threatening to impair the reputation and feasibility of some projects. With inflation levels likely to rise amid massive government spending, the competitiveness of the construction sector could also be put to test, with some contractors already forewarning of material shortages and escalating construction costs that could impede future development activity.

The real estate market in Doha is already one of the region’s fastest growing, with massive developments set to be delivered over the next 10 years.  In the next five years, Doha’s residential stock levels will rise by around 25 percent, total office inventory will grow by 50 percent and hotel and hotel apartment supply will double. From a current stock of one million square metres (m²) of gross leasable area (GLA), Doha’s retail market will also see close to 100 percent growth by 2017. As the Doha office market sees a growing number of building completions over the next three to five years, vacancy rates are expected to rise.

Despite widespread concerns over the long-term capacity for space in Qatar, there is pent-up demand for the right types of real estate product as a polarised market has evolved. For instance, Doha’s retail market is currently characterised by an undersupply of organised retail facilities, with existing malls such as City Center, Villaggio and Landmark all running at full occupancy. However, within the next five years the entire supply and demand picture will be transformed, spelling danger for existing centres amid a risk of cannibalisation from one of the new larger entrants to the market.

60,000 - Number of hotel keys Qatar aims to have by 2022.

The hospitality sector is also transitioning, with a significant portion of Qatar’s recent construction activity focused on the development of tourism infrastructure, as the country aims to offer a supply of around 60,000 keys by 2022.  Total room supply has now reached close to 19,000 keys, with inventory levels growing rapidly, particularly in and around the diplomatic area.

The short-term impact of this new supply has been broadly negative, with occupancy rates and average daily rates struggling to achieve growth.  With a large pipeline of new product to be delivered in the coming years, Doha’s hotel sector will continue to experience challenging conditions for the foreseeable future.  During 2012, average occupancy rates reached just 60 percent, up one percent from the 2011 figure, but still substantially lower than other regional tourism markets, such as Dubai (76 percent) and Abu Dhabi (65 percent).

Although easy to concentrate on the short-term negative outcomes of Qatar’s aggressive expansion programme, the current development boom will ultimately have a varied set of impacts.  

Clearly, oversupply in some sectors will be a feature of Qatar’s post-World Cup reality, but on the flip-side the nation will be benefitting from the considerable improvement to infrastructure, particularly in the form of new transport facilities.  In the long term, it will be this type of investments that will generate new jobs and help to diversify Qatar’s economy.