COMPETING FOR LEISURE

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An abundance of new supply is set to transform Qatar’s thriving retail landscape, with sustained levels of consumer confidence and high occupancy rates driving optimism among brick-and-mortar retailers. According to a Qatar real estate report released by DTZ Research at the end of last year, following the opening of the 195,000-sq-metre Mall of Qatar on December 10, retail space in Doha totalled 838,000 sq metres distributed across 15 malls. Total retail space is set to increase to some 1.85m sq metres by the end of 2019, by which time a further nine malls are expected to have opened.

With all but two of these malls set to open this year, concerns have been raised that the retail market may suffer from the dual effects of oversupply and more straitened economic circumstances in the coming years. However, DTZ notes that occupancy levels and rents have remained high, with malls in Doha typically charging QR260-QR300 ($74.10-82.40) per sq metre for rent on a monthly basis. By comparison, the upper end of the average range in 2014 was around QR260 ($74.10).

Changing customer expectations

Retailers are therefore confident that the sector’s performance will reward investment over the medium to long term; however, a number of stakeholders recognise the need for evolution in the approach of large shopping centres to keep customer interests alive.

“It is true that retail will face an oversupply in the coming years,” Kareem Shamma, CEO of Doha Festival City, told OBG. “As a result, the market is responding by moving more towards entertainment. In fact, we do not consider ourselves a mall – shopping is only one part of the whole experience.”

Costing QR6.5 billion ($1.8 billion) and offering 244,000 sq metres of gross leasable area, Doha Festival City is set to be among the largest malls in the Gulf when it opens in April. According to Shamma, 90% of the mall’s retail space has been leased. The entertainment element of Doha Festival City will include an Angry Birds theme park, an “edutainment” city for children, an Arabian-themed snow park and an adults-only videogame area.

Another one of the larger developments in Qatar is Lusail City’s Place Vendôme – a multi-purpose complex that will include a mall with 500 retail outlets. Sean Kelly, the development’s project director, told OBG that the $1.5 billion project already has strong lease commitment from retailers, with completion of works scheduled for late 2018. He also highlighted the need for brick-and-mortar retailers to offer something different to continue to draw shoppers.

“With the increase in retail supply and the growth of e-commerce, retail destinations are having to be increasingly competitive in providing the customer with focused and personalised customer service,” Kelly told OBG.

Continued consumer confidence

Retailers’ investment in the future of the market is supported by the high disposable incomes and consumer confidence of the Qatari population. Despite moderating economic growth – which saw GDP expansion drop almost one percentage point to an estimated 2.7% in 2016, according to the IMF – consumer confidence remains strong. This was evidenced by a score of 184.3 out of a possible 200 in the third quarter of 2016 on the Ministry of Development, Planning and Statistics’ consumer confidence index. This figure is just below the 2013-16 average of 184.67.

In 2015 gross income per capita in Qatar stood at $83,990. This translated to high consumer spending, which reached a new high of QR131.7 billion ($36.2 billion), up from QR118.5 billion ($32.6 billion) in 2014, according to the Qatar Statistics Authority.

According to a survey commissioned by American Express Middle East and conducted by German market research company GfK, wealthy Qataris spent an average of $4000 a month on luxury goods in 2015, twice as much as the GCC average and around 12% of their household income. Meanwhile, UK-based BMI Research forecast in January 2017 that household retail spending growth in Qatar will average 10.2% until 2020.

Promoting retail tourism

Another measure being taken to support the growth of the retail market is the promotion of the country as a regional destination for retail tourism. One such offering is Shop Qatar, a month-long festival of Qatar retail held for the first time from January 7 to February 7 this year. According to the Qatar Tourism Authority, the event helped drive up visitor numbers over the period by 16.8% year-on-year (y-o-y). The festival was particularly successful in attracting the Saudi Arabian family market. Of the 188,500 GCC nationals that visited, over 133,800 were Saudi Arabian, with the number of visitors from the kingdom increasing by 43% y-o-y during its school holiday period in January.

This Qatar economic update was produced by Oxford Business Group.