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    Oil and gas firms pull back spending, but rent in Qatar keeps climbing

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    Photo for illustrative purposes only.
    Photo for illustrative purposes only.

    In the latest sign of spending restraint in Qatar, several major oil and gas firms have hit the brakes on leasing new apartment blocks and villa compounds in Doha, a local real estate firm has said.

    But high demand from other industries, including the growing hospitality, healthcare and construction sectors, will keep rental prices up through the rest of the year, DTZ officials told reporters yesterday.

    Plunging oil prices have prompted Qatar’s state-backed companies to scrap or postpone billions of dollars worth of mega-projects, namely Industries Qatar’s Al Sajeel petrochemical plant and, more recently, the al-Karaana petrochemical facility planned by Qatar Petroleum and Royal Dutch Shell.

    In tandem, rumors of unofficial hiring freezes in the energy sector have circulated in recent months.

    Meanwhile, there has also been a noticeable decline in requests from energy firms for new employee accommodations and office space, industry observers say.

    “They are a big player … (and) there’s no new demand,” said Johnny Archer, an associate director in DTZ’s Qatar-based consulting and research department.

    Rents to keep rising

    Still, weaker demand from oil and gas firms will likely not spell any short-term relief for residential tenants, DTZ said.

    For illustrative purposes only.
    For illustrative purposes only.

    Qatar’s surging population growth, combined with corporate expansions in other sectors such as transportation mean that housing costs will continue to climb in the coming months amid a shortage of affordable rental options in popular parts of Doha.

    “We’re seeing new supply, but it’s barely keeping up with demand,” Archer said.

    DTZ figures suggest that residential rents in Doha have increased between 5 and 10 percent over the last six months, a trend that Archer said would continue through the remainder of 2015.

    Demand is particularly strong for mid-range apartments in central neighborhoods such as Al Sadd as well as four and five-bedroom villas across Doha, DTZ reported.

    Outside of Doha

    To cope with demand, Archer said many local developers are constructing new mid-range homes in areas outside of Doha such as Al Wakrah and Umm Salal where land is cheaper.

    “We’re seeing more development on the periphery (of Doha),” he said. “It’s part of the evolution of any big city.”

    Newly open Souq Waqif in Al Wakrah
    Newly open Souq Waqif in Al Wakrah

    As Qatar’s capital has become increasingly congested, government planners have been encouraging more residents to live outside Doha, enticing them by constructing more schools, retail space and healthcare facilities.

    However, some residents are learning that the country’s rapid pace of development means that this isn’t always a long-term solution.

    For example, many residents of Barwa City were attracted by the low rents that were initially offered when the area, located between Mesaimeer and the Industrial Area, was relatively undeveloped.

    But as new services and amenities began to appear in the vicinity, some tenants started to receive notices of large rent increases that their landlord said reflected the area’s growing popularity.

    Elsewhere, DTZ said it expects up to four residential towers – containing some 700 units – in the Pearl-Qatar could be completed and be available for occupancy by mid-year, provided the buildings receive Civil Defense approval.

    Office, retail and hospitality

    Slower spending by oil and gas firms is also having an impact on other segments of the real estate market.

    Office leasing has been sluggish so far in 2015, DTZ said, noting that government bodies and energy firms have occupied some 65 percent of the office space that has come onto the market in Dafna/West Bay in recent years.

    On the retail front, the firm said there are currently a dozen new shopping centers in either the planning or construction phases. These include mega-malls such as Doha Festival City and Mall of Qatar.

    Once all are completed,the amount of shopping center space in Qatar is expected to triple, and bring about “dramatic changes” to the country’s shopping scene, Archer said.

    Doha Metro rendering
    Doha Metro rendering

    He added that the sector could evolve into a two-tier market with several premium malls commanding higher rents than older shopping centers that lack the same quality tenants, parking and connections to the Doha Metro.

    In the hospitality sector, DTZ said the strong occupancy figures posted by local hotels have been driven by a surge of tourists combined with, until very recently, a lack of new hotels opening their doors.

    However, thousands of new rooms are expected to be completed in the coming years as Qatar increases its supply of hotel rooms to meet its obligations as host of the 2022 World Cup.

    DTZ said hotels will face challenges keeping those rooms filled outside the tournament.

    “Everyone has concerns about how sustainable that will be,” Archer said.

    Thoughts?

    Peter Kovessy
    Peter Kovessy is a reporter with Doha News. Prior to moving to Qatar in 2013, he was the editor of the Ottawa Business Journal in Canada. He holds a Bachelor of Journalism degree from Carleton University.

    21 COMMENTS

    1. “In tandem, rumors of unofficial hiring freezes in the energy sector have circulated in recent months.”

      Rumours? No O&G companies have not frozen hiring they are laying people off, from QP, RG, QG to all the service companies and anyone dependent on the industry.

    2. Rent increases are due to collusion between the few main players. When the crash comes and they can’t rent their proprieties at all I will not shed a tear for these parasites on society.

      All you need to understand from this report is office rental has stagnated, so that tells you that professionals are not increasing and these are those that rent. Thousands of labourers that are being imported do not rent, they get provided basic accommodation.

    3. The hiring freeze in RG is offical and not rumored. It is however rumored something like 30% of the expat staff in all oil and gas companies will be let go after the current school term comes to an end

    4. It is overstaffed anyway there. They can get rid of half of the non technical team (HR, finance, services, etc) and keep the same level of productivity.

    5. Most oil and has companies are overstaffed. They can get rid of half of the non technical team (HR, finance, services, marketing, etc) and keep the same level of productivity.

      • Most of those positions are held by Qataris so they will not be fired as they have to meet nationalisation targets. The irony is as the expats get fired the nationlisation percentage will go up!

      • Stupid thing is that the government had wasted millions and will waste millions more on the world cup. This is the illogical spending. Job cuts will not work if the anticipated 30 percent is carried through. Company will come to a standstill.

        • I doubt it. QP is over staffed with a lot of complacent expats just mulling till retirement. Cut 50% and you’ll notice little difference

          • Having worked in middle east for over 10 years I have seen job cuts before. After a year they will be recruiting expats again. Guaranteed

      • Nope. This is part of the government strategy to indirectly support Qatar Airways, or else how would they pay for their new shiny expensive airplanes? All government and many big private companies have to fly their managers at least business class.

      • Good point But that’s the last thing they will do. They will get rid of the people who at least do some work before touching the benefits of locals.

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