Q1 2016 Real Estate Market Review - Qatar Increase in vacancy rates - PowerPoint PPT Presentation

Q1 2016 Real Estate Market Review - Qatar Increase in vacancy rates in the office and residential sectors

Q1 2016 Real Estate Market Review - Qatar Economic Overview Macro Economic Trends Brent Crude Oil (Price per Barrel $) • Qatar’s economic reliance on the hydrocarbon 70 sector has resulted in further cuts to government 60 spending in Q1 2016, as oil prices fluctuated 50 between $38 and $42 per barrel in March. 40 • The Standard & Poor’s (S&P) credit ratings 30 agency recently confirmed Qatar’s AA rating and 20 stable outlook. S&P noted that Qatar’s 10 macroeconomic fundamentals remain solid 0 despite the challenges the state is facing. The Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 international credit rating agency warned however, that the government’s balance sheet Nominal GDP and Real GDP Growth will deteriorate as long as oil prices remain 900,000 40% subdued. 800,000 35% • Despite the fall in oil & gas revenue, major 700,000 30% infrastructural projects are progressing as 600,000 25% QR Million 500,000 planned, maintaining economic growth. The 20% 400,000 current cost of projects that are underway is % 15% 300,000 QAR261bn, which excludes projects in the 10% 200,000 energy and private sectors. 5% 100,000 0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 Nominal GDP (Oxford Economics) Qatar Real GDP Growth 2

Q1 2016 Real Estate Market Review - Qatar Residential Market Prime Apartment Supply Trends in Residential Market 40,000  The supply of new residential accommodation 35,000 has increased in recent months and this trend 30,000 No. of Apartments will continue throughout the year as a significant 25,000 number of apartment projects reach completion. 20,000 15,000  Recent redundancies in the government and oil 10,000 and gas sectors has resulted in a slowdown in 5,000 demand in the past 12 months. 0  2012 2013 2014 2015 2016 2017 2018 2019 2020 The increase in supply and reduced demand has resulted in increasing vacancy levels for primary Diplomatic District Pearl Lusail Msheireb and secondary apartment market. The changing dynamics in the market suggest that recent signs Prime Apartment Rents of falling rents in the apartment sectors may 21,000 continue throughout 2016. 19,000  Construction of new villa compounds throughout 17,000 QAR per month 15,000 Doha has been limited in comparison to 13,000 apartment buildings. While there has been an 11,000 increase in vacancy levels, DTZ believe that 9,000 occupancy rates for compound villas will remain 7,000 relatively high, with less downward pressure on 5,000 2011 2012 2013 2014 2015 Q1 2016 rental levels. One Bed Two Bed Three Bed 3

Q1 2016 Real Estate Market Review - Qatar Office Market Supply and Vacancy Trends in West Bay New Demand Registered by DTZ 2014 v 2015 1,800 25% 45,000 1,600 40,000 20% 1,400 35,000 1,200 30,000 15% 1,000 25,000 800 20,000 10% 600 15,000 400 5% 10,000 200 5,000 - 0% 0 2009 2010 2011 2012 2013 2014 2015 Q1 2016 Const Fin Serv Tech Govt Oil&Gas Prof Serv Misc Diplomatic District Availability 2014 2015 Prime Office Rents by District Trends  310 Grade A offices in West Bay currently command between QAR 150 and QAR250 per sq m per 280 month depending on the size of units and quality 250 of the building. Typically, rents of between 220 QAR150 and QAR180 per sq m are being quoted 190 for larger office floorplates. 160  Downsizing, and significantly reduced demand 130 from government and oil and gas sectors, has 100 resulted in new buildings been made available to 2010 2011 2012 2013 2014 2015 Q1 2016 Diplomatic District - Prime Diplomatic District - Average lease, with availability levels increasing for the first time since 2010. Airport Road C/D Ring Road and Al Sadd 4

Q1 2016 Real Estate Market Review - Qatar Hospitality Market Hotel Supply Pipeline of Hotel Supply 140 70,000 120 60,000 100 50,000 No. of Hotels No of Rooms 80 40,000 60 30,000 40 20,000 20 10,000 0 0 2010 2011 2012 2013 2014 2015 2010 2012 2014f 2016f 2018f 2020f 2-star 3-star 4-star 5-star Room Keys by Rating (20,713 keys) Trends  1% 15 new establishments opened in 2015, increasing room supply to over 20,700. 11%  88% of supply is classsified as either 4 Star 2-star of 5 Star 3-star 50%  Overall occupancy rates fell from 73% in 4-star 2014 to 71% in 2015 5-star 38%  ADR dropped by 5.7% to QAR 520, while RevPAR fell by 8.8% to QAR 370 5

Q1 2016 Real Estate Market Review - Qatar Retail Market Accommodation by Mall (643,000 sq m) Prime Retail Rents City Centre 350 Landmark Hyatt Plaza 300 The Mall Rent QAR Per Sq M 250 The Centre 200 Royal Plaza Centrepoint 150 Villaggio 100 Lagoona Mall The Gate 50 Dar A Salam Mall 0 Ezdan 2009 2010 2011 2012 2013 2014 2015 West End Mall Shopping Mall Headline Retail Rents Showroom Rents Gulf Mall Estimated Completion Trends in Retail Market Project Location Date Mirqab Mall Al Mirqab Street 2016  Organised retail supply currently totals almost Al Hazm Mall Markhiya 2016 643,000 sq m across 14 malls Doha Mall Abu Hamour 2016 Katara Mall Al Qassar 2016  High occupancy rates and strong demand from Tawar Mall Duhail 2016 retailers. This has led to rental increases in Mall of Qatar Al Rayyan 2016 prime retail malls over the past 12 month Doha Festival City Umm Salal 2017  DTZ estimates that there is currently more than Northgate North Doha 2017 1.3 million sq m of organised retail Place Vendome Lusail 2017 Marina Mall Lusail 2018 accommodation under construction in Qatar 6

Cityscape Qatar 2016 Land Market – The Macro Economy Macroeconomic Factors Affecting Land Transactions The Price of Oil Brent Crude Source: Bloomberg • Brent Crude has fallen from $65 to $40 per barrel year on year and from $114 in June 2014 • Reduced government spending on non-essential projects • Investors more cautious given the economic climate 7

Cityscape Qatar 2016 Land Market – The Macro Economy Macroeconomic Factors Affecting Land Transactions Equities Markets Qatar Exchange Index Source: Bloomberg • Qatar Exchange Index has fallen from 11,900 to 10,300 year on year • FTSE 100 Index has fallen from 6,900 to 6,400 year on year, after crossing 7,000 in April 2015 8

Cityscape Qatar 2016 Land Market – The Macro Economy Macroeconomic Factors Affecting Land Transactions Credit Availability Financial institutions are: • Reducing exposure to riskier assets • Reducing Loan to Value (LTV) ratios • Protecting their balance sheets • Following enhanced Qatar Central Bank (QCB) and Basel III regulations • Overall more cautious approach to lending 9

Cityscape Qatar 2016 Land Market – What Are We Actually Seeing Macroeconomic Influence of Land Transactions Land Transactions - QEI - Brent Crude 350 120 300 100 Number of Land Transactions QEI 00' / Brent Crude USD bbl 250 80 200 60 150 40 100 20 50 0 0 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Month Land Transactions QEI Brent 10

Cityscape Qatar 2016 Land Market – What Are We Actually Seeing Ministry of Justice Land Transaction Analysis Qatar Land Transactions - Q2 2011 to Q1 2016 12,000 8,000 7,000 Total Value of Land Transactions (QAR Millions) 10,000 No. of Transactions / Average Price (QAR psm) 6,000 8,000 5,000 6,000 4,000 3,000 4,000 2,000 2,000 1,000 0 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 Total Value (Millions) No of Transactions Average Price PSM 11

Cityscape Qatar 2016 Land Market – What Do We Forecast Looking Forward • Land values to stabilize overall with a reduction in some districts • Speculative purchases to reduce • Land to remain as a long-term store of value for local investors especially given the uncertainty in the wider financial and commodities markets • Reduced income growth impacting end values and ultimately the residual value of land leading developers to reduce the amount they are willing to pay for land 12