nd

QUARTER REVIEW 2018 Real Estate Market

www.valustrat.com VPI ValuStrat Price Index Residential

The second quarter 2018 ValuStrat Price Index (VPI) - Residential displayed overall 10.9% annual and 4.5% quarterly declines in capital values.

Villas and freehold apartments saw quarterly price drops of 5.2% and 1.1% respectively. Amongst freehold apartments, The Pearl witnessed the highest overall decline in values followed by and Lagoon. Whilst some villa locations had only marginal reductions, others experienced steeper falls.

Quarterly capital depreciation of 0.7% to 5.4% was seen in clusters of Ain Khaled/Abu Hamour, Al Waab, Muaither/New Al Rayyan, , /, and Umm Salal. Declines of 7.3% to 12.5% were seen in Al Wakra/Wukair, , Al Khor and /. Gross yields stood at 6% for apartments and 4.3% for villas, averaged at 4.9% for all residential units.

ValuStrat Price Index 13 Villa and 3 Apartment Locations in Qatar [Base: Q1 2016=100]

120

100

100 96.3 94.2

90.9 89.8 87.2 84.9 82.7 81.3 80 77.7

60 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018

Source: ValuStrat

1 | Qatar Real Estate Market 2nd Quarter 2018 Review MacroEconomicSnapshot

• Real Gross Domestic Product (GDP) increased 1.4% YoY (QAR 199.2 billion), driven by growth in the non-hydrocarbon sector (4.9% YoY in Q1 2018) - as per latest estimates released by Ministry of Development Planning and Statistics

• Qatar Central Bank increased deposit rates by 25 basis points to 2%, post US Federal Fund increment by the same amount

• Population is estimated at 2.58 million as of Q2 2018

1,836,000 2,045,000 2,235,000 2,421,000 2,597,000 2,641,000 2,580,000 2012 2013 2014 2015 2016 2017 2018-Q2

Qatar Population Source: Ministry of Development Planning & Statistics

• Qatar government ratified a draft law which will allow foreigners to own 100% of businesses in all economic areas, except for financial sector and commercial agencies involved in the purchase of real estate

• During the first two months of Q2 2018, oil export revenue and total imports value increased by 29% and 2.9% YoY respectively

Consumer Price Index vs. Housing Index • Consumer Price Index (CPI) January 2015 – YTD increased 0.24% YoY and decreased by 0.68% during the second quarter. Transport, Education, Food & Beverage and Health were the main drivers of annual inflation

• Housing and Utility Expenses Index decreased 4.6% YoY and 1.2% QoQ Jul Jul Jul Oct Oct Oct Apr Jan Jun Apr Apr Apr Feb Jan Jan Jan Jun Jun Jun Feb Feb Feb Sep Sep Sep Mar Nov Dec May Nov Dec Nov Dec Aug Aug Aug Mar Mar Mar May May May

2015 2016 2017 2018

General Index (2013=100) Housing, Water, Electricity, Gas and Other Fuels

Source: Ministry of Development Planning & Statistics, ValuStrat

www.valustrat.com | 2 ResidentialSupply

400 • A mix of 775 apartments and villas were Qatar Residential Supply added, total stock stood at 288,100 units as 2015-2019 350 of quarter end (‘000 UNITS) 2015 • Apartment supply consisted of 600 units 300 from delivered projects in , Al 250 Muntazah, Lusail (Fox Hills) and Al Aziziya 275 200 • Completion of villa compounds in Umm 150 2016 Salal Mohammad, and Al 280 Wakrah added 175 new properties to the existing stock • Expected completions for 2018 have been 286 adjusted downwards from 14,200 to 12,800 2017 due to delayed deliveries 286 • This year’s Cityscape exhibition unveiled 12.8 major residential projects such as Gewan Island in The Pearl (660 units), second phase 150 of Giardina Villas (66 units), Wadi One in 2018E 299 200 Mshiereb Downtown (72 units), Al Kharaij 5.9 250 Tower in Lusail (250 units), Baywalk Towers in The Pearl (244 units) and second phase of 300

Place Vendome in Lusail (350 units). All 2019E 350 projects are expected to be ready by 2021 Existing Expected Supply* 467 400 *May be subject to significant downward adjustment depending on construction delays Source: Ministry of Development Planning and Statistics, MEED Projects, ValuStrat

ResidentialSales

• Median transacted prices for houses fell Residential Median Transacted Prices 6.2% YoY and 3.9% QoQ • Transactional volumes for houses increased 16.4% YoY and 12.5% QoQ • Median transacted price for houses was QAR 2.7 million. Five largest ticket sizes were seen in The Pearl, Al Thakhira, Al -6.2% -9.3% Last Year Last 6 Months Qetaifah and Umm Karn for developed plots ranging from 1,500 sq m to 11,000 sq m • Majority of transactions took place in Al Daayen (24.5%) followed by (22.7%) and Al Rayyan (21%) • 40 transactions were recorded for residential buildings with 48% of -3.9% transactions above the median ticket price Last Quarter

of QAR 10.1 million concentrated in , Source: Ministry of Justice, ValuStrat , and Fereej Abdul Aziz

3 | Qatar Real Estate Market 2nd Quarter 2018 Review ResidentialRents

• Median asking rents declined 12.4% YoY and Residential Asking Rents 2.5% QoQ • Median monthly asking rents for apartments fell by 3% against Q1 2018. The highest quarterly fall in rentals was seen in Al Mansoura, and Al Sadd • As per ValuStrat research, less than 50% of households in Qatar can afford the current -12.4% -5.0% Last Year Last 6 Months average rental of QAR 7,250 for a typical apartment in Doha City • Median monthly asking rents for villas decreased by 2% QoQ • Villas in areas outside of the city centre experienced the highest quarterly declines of up to 8% -2.5% • Monthly leasing rates for two-bedroom Last Quarter apartments are QAR 9,500-17,000 in The Pearl and QAR 7,000-9,000 in Lusail Source: ValuStrat

Median Monthly Asking Rent (QAR) Median Monthly Asking Rent (QAR) &Quarterly Change (%) - Apartments & Quarterly Change (%) - Villas

9,000 18,250 West Bay The Pearl 11,000 -1% 20,000 -2% Lagoon 13,500 22,000

7,500 13,000 Fereej Bin 8,000 -3% Al Waab 14,000 -5% Mahmoud 8,500 15,000

6,250 10,000 Al Sadd 7,250 -3% Al Muraikh 10,750 -5% 9,500 14,000

6,250 10,000 Lusail 7,500 -1% Abu Hamour 12,500 -2% 8,750 14,500

5,500 7,500 Al Mansoura 6,000 -5% Al Wakrah 9,000 -5% 6,250 11,500

One Bedroom Three Bedroom Three Bedroom Five Bedroom Two Bedroom Quarterly Change (%) Four Bedroom Quarterly Change (%)

Source: ValuStrat Source: ValuStrat

www.valustrat.com | 4 OfficeSupply

• Under construction office stock to be Qatar Office Supply completed by 2019 was estimated at 2015-2019 1.36 million sq m Gross Leasable Area (Million sq m GLA) (GLA) 0.74 • Five office buildings were added this 0.72 quarter in Fereej Bin Dirham (B Ring 4.61 Road), Al Mansoura, Old Salata, Al 3.89 3.5 3.89 Hilal (C Ring Road) and Rawdhat Al 3.0 Khail (C Ring Road), comprising 47,500 sq m GLA

• Projected supply for 2018 has been adjusted downward from 960,000 sq m to 720,000 sq m due to delayed deliveries 2015 2016 2017 2018E 2019E

Existing Stock Expected Supply

Source: MEED Projects, ValuStrat

OfficePerformance

• Median office asking rents fell 16.2% Office Median Asking Rent (QAR/sq m/month) YoY and 1% QoQ and Quarterly Change (%) • Median monthly asking rents for office space in West Bay were QAR 145 per sq m, followed by QAR 120 per sq m in 0% -2% 0% -1% -2% 0% -5% C/D Ring Road and QAR 117 per sq m in Lusail 145 • With average occupancy within the range of 55-65%, offices in Salwa Road experienced the highest quarterly fall 120 as median monthly asking rents 117 109 amounted to QAR 90 per sq m in the 103 area 100 90 • Offices along C/D ring experienced an estimated 2% QoQ and 8% YoY fall in median monthly asking rents. This drop was primarily attributed to falling asking rents along C-Ring Road where a number of new offices were added to West Bay C/D Ring Lusail Citywide Grand Al Sadd Salwa Road Hammad Road current stock, levelling occupancy at Avenue 65% against 70% in Q2 2017 Median Asking Rate (QAR/sq m) Quarterly Change (%)

Source: ValuStrat

5 | Qatar Real Estate Market 2nd Quarter 2018 Review RetailSupply

• Katara Plaza: Valley Mall (35,000 sq m GFA) Retail Malls & Shopping Centres and Children’s Mall (3,600 sq m GFA) were (‘000 sq m GLA) completed, it will feature shops, department stores and office space 330

• As of Q2 2018, the total supply of organised retail space reached 1.8 million sq m, with 376,000 sq m GLA (4 malls) in the pipeline 159 by the end of the year

• Qatar Development Bank (QDB) launched the second phase of Al Furjan Markets which will feature no less than 300 shops distributed across Al Rayyan, Umm Salal, Al Khor and Al Wakrah expected to be 22 completed by 2019

• Based on GLA and population figures, 6 161 629 981 shopping centre GLA of Qatar is 680 sq m 30 per 1,000 capita, compared to the GCC average of 588 sq m per 1,000 capita Neighbourhood Community Regional Super Regional 3k-10k sq m 10k-30k sq m 30k-90k sq m > 90k sq m

Existing Stock Expected Supply (till 2019)

Source: ValuStrat

RetailPerformance

• Events such as Qatar Summer Festival Distribution of GLA of Shopping (QSF) and Garangao drove higher consumer Centers/Malls across Municipalities spending during the quarter

• The median monthly rent for medium line shops (between 100 sq m and 250 sq m) in organised retail space was QAR 340 per sq m. 3% While median monthly rent for street retail 14% shops in Doha was QAR 230 per sq m

• In an effort to maintain healthy occupancy, 40% landlords in newer shopping malls introduced incentives by absorbing operational expenses and lowering service charges 39% 4% • Qatar's e-commerce market currently valued at QAR 4.36 billion is projected to grow 17% annually and could exceed QAR 11.65 billion by 2022, as per Ministry of Transport and Communications Al Khor Al Wakra Umm Salal

Doha Al Rayyan

Source: ValuStrat

www.valustrat.com | 6 HotelSupply

• Total number of hotel rooms and Hotel Room Supply apartments stood at an estimated 26,670 2015-2019 units within 137 establishments (‘000 KEYS) 3.3 • Ezdan Palace and Vichy Celestin Spa Resort, both 5-star, and Al Mansour Residence (hotel apartments) were unveiled, adding 5.3 423 keys to the total supply

• Phase 2 of Katara Lusail Twin Towers was inaugurated, once completed in 2021 it will add 505 rooms and 49 hotel apartments to 31.5 the total supply 26.2

26.2 22.9 • Due to delays in project deliveries, the 20.7 2019E projected hotel supply has been adjusted 2018E 2017 downwards from 6,400 to 5,300 keys for this 2015 2016 year

Hotel & Service Apt Rooms Expected Supply

Source: Qatar Tourism Authority, ValuStrat

HotelPerformance

• As of May 2018, total number of visitors was 828,562, down 40% when compared to the same period last year • Average hotel occupancy fell 7.7% YoY, while hotel apartments grew 12.3% YoY • Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) for hotels declined 14.8% and 22% annually. While ADR and RevPAR for hotel apartments fell by 16.8% YoY and 5.4% YoY, respectively • According to QTA, improved promotional efforts and the opening of representative offices in Russia, China and India may have helped visitor arrivals from these countries to grow 441%, 27% and 15% YoY respectively during Q1 2018

Distribution of Qatar Visitors by Region May 2017-May 2018

6% 11% 12% 9% 8% 8% 9% 9% 9% 8% 9% 8% 8% GCC Other Asia inc/Oceania 16% 19% 25% 26% 24% 29% 31% 32% 34% 35% 21% 28% Europe 35% Other Arab 29% Americas Other Africa 39% 35% 37% 1% 35% 50% 41% 9% 39% 39% 37% 38% 45% 39% 2% 4% 5% 4% 9% 7% 6% 3% 3% 3% 3% 7% 4% 2% 2% 2% 39% 6% 7% 6% 6% 6% 6% 6% 8% 20% 19% 16% 21% 13% 11% 10% 11% 11% 9% 11% 10% Jul Oct Jan Apr Jun Nov Sep Aug Dec Mar May Feb May

2017 2018

Source: Ministry of Development Planning & Statistics, ValuStrat

7 | Qatar Real Estate Market 2nd Quarter 2018 Review IndustrialInvestment/Supply

• Driven by growth in food, refined petroleum Industrial Production Index and chemical products, manufacturing Q1 2016 – YTD output rose by 2.1% YoY during April and May 2018, as per the latest Industrial Production Index published by MDPS

• Phase 3 of logistical warehousing project by Qatar Industrial Manufacturing Company (QIMC) and cold storage facility by Zad Holding were completed, adding 44,800 sq m GFA of warehousing space

• 20,000 sq m of industrial units were established in the New , which will manufacture a variety of goods such as equipment, plastic goods and Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Apr May aluminium fabrication 2016 2017 2018

Mining and Quarrying IPI (2013=100) Manufacturing

Source: Ministry of Development Planning & Statistics, ValuStrat IndustrialPerformance

• As per MDPS statistics, during April 2018 net tonnage of bulk cargo increased by 27% over 12 months in Qatar Ports with Messaeid Port receiving the highest traffic • Improvements in local production, cargo traffic and e-commerce has boosted demand for warehousing space. As per ValuStrat research, warehousing demand is expected to increase annually at an average of 15% during 2018-19 • Average asking rents for dry/ambient warehouses fell by 4.6% QoQ and 13.8% YoY • Asking rents in Al Wakra industrial area reduced by 10% this quarter, owing to an influx of warehousing supply in the area • Manateq reduced ground rents by as much as 50% for industrial plots in Messaied Industrial Area to QAR 10 per sq m per year, to attract potential investors and support SMEs • Average asking rents for cold storage facilities leased on a per unit basis were QAR 10,000-18,000 per month in Doha Industrial Area, with average unit sizes ranging from 50-80 sq m

Warehouses Asking Rental Rates 65 (QAR/sq m) 60

30 25 20 20 15 12

Sailiya Wukair New Industrial Area Old Industrial Area

Rent - Upper Range Rent - Lower Range Source: ValuStrat

www.valustrat.com | 8 10.05.18 Qatar’s real estate deal value at QR4bn in Q1,2018 Pawel Banach, General Manager at ValuStrat Qatar, said: “Lower oil prices since late 2015 have continued to exert downward pressure on capital and rental values for property across Qatar. Despite the more recent pick-up in oil prices, the status quo remains the same with a downward trajectory evident in the performance of real estate sector.” 23.04.18 ValuStrat debuts Qatar Residential Index - First quarter shows signs of continued downward pressure, however the rate of decline has slowed “Currently, the Ministry of Justice records transactions in majority of the areas, however, it is not always possible to filter the statistics into useable components. ValuStrat recognised the importance of constructing a representative20.11.17 quarterly price index that captures near real-time pricing, complimenting official transactional data. …’ explains Pawel Banach MRICS-General Manager. 20.05.18 More residential units to top up Qatar’s property market in ’18 Qatar property markets total housing stock by the end of 2017 was approximately 286,125 units. For Q1 2018, nearly 1,200 units were added. Apartment supply consisted of 960 units coming from new additions in Lusail, Fereej Bin Mahmoud, Al Sadd and Najma.

Completion of villa compounds in Ain Khalid, Al Maamoura and Umm Salal Ali added 240 new units to the total stock, noted ValuStrats first quarter review of Qatar real estate market. 07.01.18 Boom in hospitality sector as number of hotels nearly double The ValuStrat report said around 1.94 million visitors from across the globe visited Qatar until October 2017. The growth was the result of steps taken by concerned authorities to promote tourism industry and putting the country in the global tourism map of the world.

9 | Qatar Real Estate Market 2nd Quarter 2018 Review ValuStrat Qatar is part of a leading consulting firm providing Advisory, Valuation, Research, Due Diligence, and Divestment services ValuStrat is a firm regulated by RICS across a diverse range of industry sectors since 1977. ValuStrat’s office network provides services to over 800 corporate clients including financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat’s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, entertainment, transport, and FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Regulated Firm and the first company head quartered in all of MENA and Asia to be accepted into the prestigious RICS Tech Affiliate program.

VPI ValuStrat Price Index

The ValuStrat Price Index for Qatar’s residential sector is constructed to represent the quarterly price change experienced by typical residential units within Qatar. The VPI uses a weighted sample representing influential locations across the city and is built by our expert RICS Registered Valuers.

Research Methodology Every effort has been made to ensure the accuracy of this document. New supply data covers all the eight municipalities of Qatar. Only completed and under construction projects are included. The new supply data does not include announced projects, and projects in design phase. The new supply database does not take into account most private building projects. Prices are calculated from actual transactions extracted from the Ministry of Justice data that have been carefully cleansed to exclude duplicates and outliers. Rental data is derived from carefully chosen listings from predetermined areas and districts for commercial and residential properties.

Copyright © ValuStrat LLC 2018 This document is the property of ValuStrat LLC and must not be reproduced or transmitted in any form or by any means, without the prior written consent of ValuStrat LLC. We welcome your constructive feedback and any corrections that may need to be made to this document. ValuStrat LLC does not accept any liability in negligence or otherwise for any damage suffered by any party resulting from reliance on this document.