REAL ESTATE MARKET 1ST HALF | 2020 REVIEW

www.valustrat.com Introduction

During the first half of 2020, COVID-19 had infected 10.2 million people globally, as per the World Health Organisation (WHO). The global health crisis not only impacted the health of millions around the world but led to restrictions on travel, social mobility and closure of non-essential businesses.

Qatar experienced its first COVID-19 case on 29th February. The government of Qatar was quick to respond by enforcing a range of measures in an effort to restrict the spread of the virus. By the end of H1 2020, Qatar had approximately 95,000 confirmed cases of COVID-19. In terms of testing, Qatar was ranked in the top twenty countries to have the highest testing per million people and also had one of the lowest numbers of deaths in proportion to the number of confirmed COVID-19 cases. In addition to implementing efficient health strategies, the government also announced an economic stimulus package of QAR 75 billion in an attempt to counter the economic fallout and provide relief to those impacted the most by the constraints.

The real estate market, like all sectors in Qatar, was impacted by the pandemic and its resulting constraints on mobility, travel and businesses. The first quarter of 2020 had a good start, particularly January and February. However, lockdown measures were implemented in March, from where we saw regressing fundamentals. In June 2020, the government of Qatar introduced a plan to release the restrictions in four phases. By the end of H1 2020, phase 1 of easing of restrictions was completed.

This report provides an overview of the performance of all sectors in real estate during the first half of 2020. Sectors such as hospitality and retail were directly impacted by the restrictive measures in place. While the remaining sectors were indirectly affected due to ensuing impact of the crisis on the economy. It will be some time before we know the full extent of the influence of COVID-19 on the economy and real estate of Qatar. However, it is evident that a new equilibrium has been established in all sectors as we have to adjust to this “new normal”.

1 | Qatar Real Estate Market 1st Half 2020 Review Timeline:

Measures

• With the advent of COVID-19 in Qatar by the end of February 2020, the Government of Qatar imposed restrictions on gathering, travel, outdoor & professional sports, education & health and business & leisure. The Supreme Committee for Crisis Management of Qatar announced on June 8th a controlled phased lifting of COVID-19 restrictions. The main premise of the plan was on the phasing of the lifting of restrictions, close monitoring of the impact of lifting restrictions and clear precautions. The four-phase plan was based on achieving target Key Performance Indicators (KPIs) and passing the minimum time required to move between phases.

Restrictions and Lifting of Measures January - September 2020

H1 2020 January February March April May June July* August* September*

COVID-19 1 717 12,027 26,582 14,411 3,154 N/A N/A Active Cases

Phases Advent of COVID-19 Restrictions Lifting of restrictions

Restricted Small scale Medium scale All mosque mosque (<10 People); only (<40 opening and opening restricted people); friday prayers, mosque restricted business & opening mosque entertainment Public events and gatherings are prohibited Gatherings opening friday related mass prayers gatherings, theatres and cinemas with precautions

Personal boats; Essential flights Low risk Expanding out of . Upon return inbound flights inbound flights travellers will go to mandatory for priority as advised by Suspension of inbound flights except for transit hotel quarantine allocated by the passenger (e.g. MOPH; metro Travel and cargo; public transport banned government for 2 weeks, paid for returning and bus by the traveller residents) restricted service

Restricted Parks, corniche Playground and Sports-related parks for and beaches skate parks; mass outdoor sports; (<10 people) (<40 people) gatherings: (1:1 and 1:5) professional team trainings, local and Outdoor & Closure of all parks and beaches; suspension of professional training of amateurs international Professional all sport activities training small sports/team sports sports outdoor groups-outdoor competition competitions only/large open only/large open (with space spaces spectators)

40% Capacity 60% Capacity 80% Capacity 100% Capacity; selected new academic Suspension of all educational institutes, health Education & private year clubs and non-emergency health services Health healthcare commences facilities

Partial opening All malls, All malls open All malls, of shops in souqs, (full hours); souqs and malls, shops wholesale souks & wholesale with minimum market, wholesale markets fully area of 300 sq museums and markets open; gradual m will open, libraries open (restricted opening of not exceeding (restricted hours and restaurants; 30% mall hours and capacity) ; museums and Closure of all retail stores in commercial capacity capacity); restricted libraries fully complexes and shopping centres except restricted restaurants open to full Business & pharmacies and food outlets; imposition of restaurants opening with hours; 100% Leisure work from home for 80% of employees in opening with gradual capacity of Private Sector; closure of all restaurants low capacity increased health clubs, (delivery and takeaway allowed); closure of capacity; 50% gyms, pools, museums and home services capacity of beauty and health clubs, massage gyms, pools, parlours and beauty and barbershops / massage hairdressers parlours and barbershops / hairdressers

* Forecast-Subject to Change Source: Ministry of Public Health www.valustrat.com | 2 Timeline:

Restrictions, Recovery & Growth

• Based on forecasts made by the International Monetary Fund (IMF) and our analysis, we have formulated a timeline to predict the recovery of the economy and various sectors of the real estate market of Qatar.

• All sectors of real estate in Qatar were experiencing declining rents and sale prices before COVID-19. To fully evaluate the impact of the pandemic on rents and prices we have to understand the previous trend and see if sale prices or rents fell more than the historical trend.

Restrictions, Recovery and Growth

Short Recovery (Q3 2020-Q2 2021) *: Growth (Q2 2021) Onwards) *: Lockdown (Q2 2020): Sector term level Removal of social mobility COVID-19 manageable in Introduction of measures of impact measures population

Medium Reduction in real GDP Reduction in real GDP** Growth in GDP**

Economy

No significant decline in Higher quarterly decline expected Slowdown in quarterly decline in Low performance compared to 2019 line with pre-COVID-19 level Residential

No significant decline in Higher quarterly decline expected Slowdown in quarterly decline in Medium performance compared to 2019 line with pre-COVID-19 level Office

Significant loss of revenue due Slowdown in quarterly decline Higher quarterly decline expected High to shut down of retail shops, but not predicted to reach compared to 2019 however, no significant decline pre-COVID-19 levels Retail in asking rents and occupancy

Decline in occupancy and ADRs Recovery in occupancy and ADRs Significant loss in RevPAR High expected to continue compared but not expected to reach (Occupancy and ADRs) to 2019 pre-COVID-19 levels Hospitality

*Forecast based on existing data as of June 2020. **Forecast based on International Monetary Fund (IMF) projections for the economy of Qatar.

Source: International Monetary Fund (IMF), ValuStrat

3 | Qatar Real Estate Market 1st Half 2020 Review Macroeconomic Overview

Economic Growth

Total GDP at Constant Prices (QAR Billions) & YOY GDP Growth at Constant Prices (%)

171.8 0.9 0.9 169.6 0.0 167.3

165.9

164.2 -0.6

-1.4

Q1 Q2 Q3 Q4 Q1

2019 2020

Real GDP (QAR Billions) Real GDP Growth (%)

Source: Planning & Statistics Authority (PSA), ValuStrat

• The Gross Domestic Product (GDP) at constant prices with a revised base year of 2018, expanded by 0.9% YoY during Q1 2020, as per the latest statistics released by the Planning & Statistics Authority (PSA). The slowdown in economic growth can be attributed to the fall in real oil output, which remains unchanged compared to Q1 2019. On the other hand, the non-hydrocarbon sector, expanded by 1.4% YoY as of Q1 2020.

• Based on revised estimates of GDP with 2018 as the base year, the mining & quarrying sector (includes oil and gas sector) contributed an average 38.3% to real GDP as of Q1 2020. Over time, mining and quarrying sector sees reduction in its contribution to the GDP.

• Amongst the non-mining sector, manufacturing, construction, wholesale and retail trade, financial and insurance activities, real estate activities and public administration comprise 49.0% of the Financial and Insurance Services and Public Administration experienced more than 7.8% YoY growth as of Q1 2020.

• The International Monetary Fund (IMF) adjusted the forecast for Qatar’s real GDP to an average of -4.3% for 2020 and then at 5.0% in 2021,this is above the Middle East and North Africa (MENA) average of 3.5%.

• A major global trend from the pandemic was a plunge in oil prices. In March 2020, the crude oil (Brent) average fell to $33 per barrel. The World Bank projected oil prices to average $35/barrel in 2020.

• International financial institutions projected oil prices to average in the range of $45-$65/barrel in the medium term. The 2020 national budget of Qatar of QAR 210.5 billion was approved in Q4 2019, representing a 2.0% increase over 2019. The government aimed to continue to consolidate fiscal policy emphasising on new tax measures, limited current expenditure and higher capital spend. QAR 90 billion was allocated for major projects, focusing on World-Cup related developments, infrastructure projects and sectors such as food security, tourism, SME’s and economic free-zones. There was a projected surplus of QAR 500 million, based on forecasted oil prices for 2020 of above $60 per barrel. However, after the pandemic, the forecasted surplus based on the higher oil prices might not materialise as the forecasted oil rate is below Qatar breakeven price of oil ($45 per barrel). The IMF projected Qatar current account balance to average at -1.9% in 2020.

www.valustrat.com | 4 Foreign Trade

• During 2017-2019 Qatar had one of the highest current account balances as a percentage of GDP in the region ranging from 3.8% to 8.7%.

• During H1 2020, export revenues contracted by 28.5% YoY with hydrocarbon related exports declining by 31.4%. Japan, India, United States of America and South Korea were the top export destinations.

• Imports fell 9.3% during the first six months of 2020. USA, China, United Kingdom, India, Turkey and Germany were the top destinations for imports.

Population

Qatar Population 2013-2020

2,045,000 2,235,000 2,421,000 2,597,000 2,641,000 2,674,000 2,773,000 2,794,000

2013 2014 2015 2016 2017 2018 2019 2020-Q2

Source: Planning & Statistics Authority (PSA)

5 | Qatar Real Estate Market 1st Half 2020 Review • As of June 2020, the population of Qatar was estimated at 2,794,000. 73.5% of the population consists of ages between 25-64. And 72.8% of the total population comprises of males.

• Based on repatriation figures announced by various embassies in Qatar, we estimated more than 35,000 expatriates were repatriated to their home countries during April-June 2020.

• As per the latest Labour Force Survey Q1 2020 published by the Planning & Statistics Authority (PSA), the economically active population reached 2.2 million, where males within the age group of 25-34 years represented the highest percentage of participation. Non-Qataris comprised 95% of the economically active population.

Inflation

Consumer price index Vs Housing Index January 2019-2020

102

100

98

96

94

92

90

88 Jul Oct Apr Apr Jan Jan Jun Jun Feb Feb Sep Dec Nov Aug Mar Mar May May 2019 2020

Consumer Price Index (2018 = 100) Housing, Water, Electricity, Gas and other Fuels

Source: Planning & Statistics Authority (PSA)

• The Planning & Statistics Authority (PSA) modified the Consumer Price Index, in 2019 making 2018 as the base year. As per PSA, the pattern of households did not change significantly during the previous five years and minor changes were observed in the basket of goods between 2013 and 2018. As per the new base year, Consumer Price Index declined by 3.2% annually and 2.2% quarterly during Q2 2020.

• As of Q2 2020, housing and utility expenses index declined 3.9% YoY and 1.0% QoQ.

• Qatar Petroleum decreased average fuel pump prices in Qatar in Q2 2020 by more than 47.9% YoY and 37.7% QoQ.

• The IMF forecasted inflation for Qatar to average at -1.2% for 2020 and 2.4% for 2021.

www.valustrat.com | 6 Residential Market Residential Supply & Demand

• As of H1 2020, total residential supply totalled 300,550 units. The first six months of 2020 saw the completion of 2,250 apartments and 700 villas scheduled to be handed over this year.

• An estimated 2,000 units were concentrated in , The Pearl and . Al Bandary Real Estate launched Al Shahed Tower with individual units for sale. Tower 13 and 15 of Viva Bahriya, The Pearl started leasing. Phase 1B in Musheireb Downtown also completed construction comprising 157 apartments.

• Approximately, 7,250 units are projected to be added during the remaining quarters of 2020. Some notable developments in the pipeline are: Abraj Bay Towers in Abraj Quartier in The Pearl, Al Residential Supply Mutahida Towers and Tower 24 in 2017-2021 Viva Bahriya The Pearl, Al (’000 UNITS) Darwish and Arwa tower in West Bay and Amwaj Tower in

Waterfront district, Lusail. 4.6

308 • A significant amount of existing 298 10.0 supply is being delivered in the 298 form of medium to large size 290 projects targeting upper-middle 286 to high-income families. Demand is being generated by lower-middle income segments. Moreover, as per our estimates, the overall growth of demand isn’t matching the growth of supply. As of H1 2020, we 2017 2018 2019 2020E 2021E estimate an oversupply of approximately 80,000 units. Existing Expected Supply

Source: MEED Projects, ValuStrat

7 | Qatar Real Estate Market 1st Half 2020 Review Residential: Demand versus Supply High Medium Supply Low

Low Medium High

Demand

Residential Rents

• As of Q2 2020 , ValuStrat Price Index for • As per VPI for residential rental values, rents have residential rental values softened 2.2% compared not declined significantly during H1 2020 and the to Q1 2020, 2.6% compared to Q4 2019 and 5.2% fall in rents is in line with historical trend. compared to Q2 2019. Over a period of two years, residential rents fell 14%. • The highest fall in rents up to 2.5% for apartments during H1 2020, was experienced in • As of Q2 2020, the median monthly asking rent for prime locations: , The Pearl and West Bay apartments was QAR 6,560, down 2.6% QoQ, 2.8% compared to Q4 2019. compared to last six months and 5.4% compared to Q2 2019. Three-bedroom apartments • The highest fall in rents for villas, up to 3% during experienced the highest asking rental declines H1 2020, was experienced in prime locations: Abu during H1 2020 compared to Q4 2019 and Q2 Hamour, Al , Al Gharrafa and Al Waab. 2019. • Typical incentives offered in the market were in • The median monthly asking rent for villas was the form of furnishing and utilities included in the QAR 10,890 as of Q2 2020, softening 0.5% QoQ, rents or one/two month rent free periods 1.0% compared to last six months and 3.7% (differing contract period). compared to Q2 2019. Five-bedroom villas experienced the highest fall in asking rents compared to Q4 2019 and Q2 2019.

ValuStrat Price Index - Residential Rental Values Q1 2016 = 100

100.0 98.0 90.2 88.2 82.9 81.4 78.1 74.5 73.1 71.3 68.5 66.9 65.6 64.6 63.6 62.9 62.7 61.3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018 2019 2020

Source: ValuStrat

www.valustrat.com | 8 Market Intelligence. VPI Simplified. ValuStrat Price Index For more details, please visit www.valustrat.com/vpi-qatar

Residential Capital Values

• As of Q2 2020, as per ValuStrat Price Index (VPI), average residential capital values was QAR 718 per sq ft (QAR 7,731 per sq m), fell by 1.4% QoQ, 1.9% compared to Q4 2019 and 4.1% compared to Q2 2019.

• The average capital value for apartments was QAR 1,036 per sq ft (QAR 11,152 per sq m), reduced by 2.3% QoQ, 2.5% compared to the first six months of 2019 and 6% YoY.

• The average capital value for villas was QAR 560 per sq ft (QAR 6,052 per sq m), declined by 1.2% QoQ, 1.8% compared to Q4 2019 and 3.6% YoY.

• Amongst freehold apartments, Lusail witnessed the highest fall in capital values followed by and The Pearl during H1 2020, compared to Q4 2019.

• For villas, eight locations out of thirteen clusters (The Pearl, West Bay Lagoon, Ain Khaled, , , Umm Salal Muhammad, Umm Salal Ali and Al Khor) saw a quarterly marginal change of less than 1% in capital values. Five locations such as Al Waab, Muaither, , Duhail and Al Wakrah saw a quarterly fall of 1.5% to 3.7%.

• As per VPI, capital values of residential units have not declined significantly during H1 2020, the QoQ and YoY fall in values during Q2 2020 were less compared to Q2 2019.

• Gross yields for residential units averaged at an overall 5.1%, adjusted by 6.2% for apartments and 4.6% for villas.

ValuStrat Price Index - Residential Capital Values 13 Villa and 3 Apartment Locations Q1 2016 = 100

100.0 96.3 94.2 90.9 89.8 87.2 84.9 82.7 81.3 77.7 75.8 75.0 73.4 72.8 71.8 71.2 70.8 69.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018 2019 2020

Source: ValuStrat

9 | Qatar Real Estate Market 1st Half 2020 Review Residential Performance Tree

Sale Price (QAR/SQ M) Monthly Rental Rate (QAR)

11,000 11,000

10,000 10,000

9,000 9,000

8,000 8,000 Performance

7,000 7,000

6,000 6,000

Residential Villas Apartments Source: ValuStrat

Residential Median Asking Rents

-14.0% -5.2% -2.6% -2.2% Last 2 Years Last Year Last 6 months Last Quarter

Residential ValuStrat Price Index (VPI)

-10.1% -4.1% -1.9% -1.4% Last 2 Years Last Year Last 6 months Last Quarter

www.valustrat.com | 10 Residential Transactions

• During Q2 2020, the transaction volume of residential houses fell 36.7% over last six months and 26.2% YoY. Although declined significantly during April and May 2020, it picked up again in June 2020. The total value of transactions of residential houses during H1 2020 was QAR 2.6 billion.

• The median transacted ticket size for residential houses during Q2 2020 was QAR 2.5 million, no change compared to Q1 2020, 10.7% decline compared to Q2 2019 and 10.7% decline during the last six months.

• During H1 2020, The Pearl and West Bay Lagoon saw purchases down 20% compared to the same period in 2019. The total value of transactions amounted to QAR 467.6 million, reduced by 32.1% compared to 2019. The transactional volume started to decline in March 2020 but picked up again in June 2020. However, volume and value of transactions in June 2020 were higher compared to June 2019.

Residential Transaction Volume

-36.6% -26.2% -36.7% -36.7% Last 2 Years Last Year Last 6 months Last Quarter

Residential Median Transacted Ticket Size

-8.1% -10.7% -10.7% 0.0% Last 2 Years Last Year Last 6 months Last Quarter

11 | Qatar Real Estate Market 1st Half 2020 Review Transactional Volume of Houses Jan 2017 - June 2020 204 203 188 186 185 184 173 170 168 168 164 163 161 160 160 159 154 153 151 146 146 145 140 133 129 129 128 125 124 124 127 112 108 109 100 100 90 90 87 78 57 52

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J

2017 2018 2019 2020

Source: Ministry of Justice (MOJ)

COVID-19: Trends

• No significant decline in rents and prices compared to 2019. The decline in fundamentals is in line with the historical trend experienced since 2019. However, we have observed landlords increased the incentives offered compared to 2019, in a bid to attract new tenants.

• We observed a trend of accelerated falls in rents and prices of apartments in prime locations during H1 2020. This trend was not witnessed in 2019 as during that year we experienced more significant declines in rents/prices of apartments in secondary locations relative to residential units in prime developments.

• Sales and leasing activity picked up since May 2020, however, did not reach the same level as 2019.

• There was no official reporting of significant job losses, however, repatriation reports from various embassies indicated repatriation of more 35,000 people during H1 2020. There was an increase in vacancies across Qatar. This may limit the absorption rate of new properties in the medium term.

• Companies reported an increase in caution in expanding their size, therefore, it may limit future growth of expatriate families in the medium term.

• Developers reported no significant delays in construction schedules of under development residential projects.

www.valustrat.com | 12 Office Market Office Supply & Demand

Office Supply 2017-2021 • As of H1 2020, the supply of office (Million sq m GLA) space was 5,060,000 sq m Gross Leasable Area (GLA). As per 0.7 ValuStrat research, 60% of existing 5.6 0.8 office space is of Grade-A. 4.8 4.8 4.1 • There was an addition of seven 3.9 office buildings and four mixed-use buildings during H1 2020 in Lusail (Marina and Energy City), , , Abu Hamour, Al Wakrah, Al Wukair and Umm Salal comprising 220,000 sq m GLA.

• Upcoming projects in 2020, currently under development 2017 2018 2019 2020E 2021E totalled 580,000 GLA, 48% of which are located in Lusail (Fox Hills, Existing Stock Expected Supply Source: MEED Projects, ValuStrat Energy District and Marina District) and Al Dafna and whereas the remaining projects are located in Duhail, , Al Hitmi, Al Sadd, • Over time, oversupply in the office sector has been and Al Muntazah. increasing, as observed by increasing vacancy rates in Approximately 60% of the upcoming office buildings witnessed since 2016. Due to falling office space is of Grade-A. rental rates across office buildings in prime districts such as West Bay and Lusail Marina, there has a been • During H1 2020, we observed an shift in demand from secondary locations to prime increase in launches of companies districts. However, the influx of supply is more than an working in e-commerce, finance increase in demand. As per ValuStrat research, the gap and technology. between demand and supply of office space may amount to more than 1 million sq m GLA.

13 | Qatar Real Estate Market 1st Half 2020 Review Office: Demand versus Supply High Medium Supply Low

Low Medium High

Demand

Office Rents

• As of Q2 2020, the median asking rent for office • Al Sadd also experienced an estimated 5% fall in space fell by 1.2% QoQ, 4.7% over six months and average rents over six months during H1 2020. 12.8% YoY. The majority of the office space in Al Sadd had asking rents ranging from QAR 55-90 per sq m, • The highest fall in office rents during H1 2020 although some buildings also quoted rents of up was experienced in office buildings across to QAR 140 per sq m. Rent-free periods of up to 3 C/D-Ring roads. Offices along C-Ring road quoted months (differing contract periods) were rents ranging from QAR 60-110 per sq m while commonplace in the area. offices along D-Ring road have asking rents ranging from QAR 70-130 per sq m depending on • We observed some offices in and size, quality and furnishing of the commercial along Al Nasr street offering up to six months spaces offered. Rent-free periods of up to 2 rent-free periods with a minimum 3-6-year months (differing contract periods) were contract. Smaller office spaces were readily commonplace in the area. available everywhere except in West Bay, where the option was available, however, in lower quality • We observed a trend of more significant declines relatively older office buildings. in rents within secondary locations (despite no significant supply additions in the area) compared • Offices offered for sale in Lusail at an average to prime locations. rate of QAR 20,000 per sq m (QAR 1,858 per sq ft) and in West Bay at QAR 16,250 per sq m (QAR 1,510 per sq ft).

Office Asking Monthly Median rents QAR/SQ M

120 110 109 106 104 98 100 94 87 86 83 82 80

60

40

20

0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2018 2019 2020

Source: ValuStrat

www.valustrat.com | 14 Office Performance Tree

Sale Price (QAR/SQ M) Rental Rate (QAR/SQ M)

20,000 120

19,000 110

18,000 100

17,000 90 Performance

16,000 80

15,000 70

Lusail West Bay Al Sadd C/D Ring Road Salwa Road

Source: ValuStrat

Office Median Asking Rents

-24.8% -12.8% -4.7% -1.2% Last 2 Years Last Year Last 6 months Last Quarter

COVID-19: Trends

• A drop in new inquiries was reported beginning from March 2020. Main transactions focused upon lease renewals compared to new leasing activity. Although, since June 2020, a pickup in leasing activity has been accounted for.

• There was a reported increase in preference from tenants for flexible short-term contracts.

• The fall in rents during the first six months of 2020 was in line with historical trend, however, landlords were more flexible in offering incentives to close deals compared to pre-COVID-19.

• There has been anecdotal evidence of job losses across Qatar. In addition, there were reports of companies adopting a “cautious” approach to expansion, therefore demand for larger office space may become limited in the medium term.

• There was an observed increase in preference of "working from home" for private companies compared to government companies. However, there is no one-size-fits-all solution to how work should proceed in the long term and how this new trend will impact office demand in Qatar. Each company have their own work requirements and outlook towards office culture. Restrictions on working in an office started to ease since the advent of Phase 1 of the lifting of measures in June 2020 and with time there can be a clear indication what this trend will mean for office space in Qatar.

15 | Qatar Real Estate Market 1st Half 2020 Review Retail Market Retail Supply & Demand

• Between March-May 2020 there was the Retail Malls and Shopping Centres closure of all retail shops in shopping centres (‘000 sq m GLA) and commercial complexes except for pharmacies and shops that sold food. In June 337 2020, with the advent of phase 1, ban on non-essential retail shops was partially lifted.

132 • The total Gross Leasable Area (GLA) of organised retail space grew 5% annually from 2018 to H1 2020 up to 1.89 million sq m, with no addition during the first six months of 2020. 981 • Approximately 170,000 sq m GLA of organised retail space comprising of three shopping 673 centres: Doha Mall in Al Maamoura, 04 Mall in The Pearl and J Mall in and 202 Place Vendome in Lusail are projected to be 40 completed by end of 2020. Assuming no Neighbourhood Community Regional Super Regional construction delays, the retail GLA will (3k-10k sq m) (10k-30k sq m) (30k-90k sq m) (> 90k sq m) exceed 2 million sq m by the end of 2020. Existing Stock Expected Supply (till 2021) Un-organised retail comprises an estimated • Source: ValuStrat 70% of the total retail supply in Qatar with the addition of approximately 50,000 sq m during first six months of 2020. 60,000 sq m is in pipeline during the remaining quarters of 2020.

• It’s a challenging time for the retail market in Qatar. Despite a reported increase in consumer spending, retail vendors have been experiencing falling turnover since 2017. This can be attributed to a slowdown in the growth of household population and consumer spending and increasing competition from an influx of new retail supply. With the advent of the pandemic, this trend is predicted to exacerbate at least for 2020-21. As per our research, the gap between demand and supply in the retail market in Qatar is estimated to exceed 1 million sq m GLA.

www.valustrat.com | 16 Retail: Demand versus Supply High Medium Supply Low

Low Medium High

Demand

Retail Performance

• As of Q2 2020, the median monthly asking rent in • Median monthly asking rents among streets shopping centres was estimated at QAR 230 per outside Doha stood at QAR 168 per sq m, down sq m, down 4% compared to Q2 2019, 2% dip in 7% compared to Q2 2019, 2% compared Q4 2019 rents compared Q4 2019 and no change and 1% compared to Q2 2020.The average rent for compared to Q1 2020. anchor stores within malls or as standalone outlets countrywide ranged QAR 50 to QAR 120 • Rent for street retail varied across municipalities. per sq m depending on size and location. Median monthly asking rents among street retail units in Doha stood at QAR 178 per sq m, down • The retail leasing market amongst shopping 9% compared to Q2 2019, 2% compared to Q4 centres was tenant-friendly, landlords offered 2019 and 1% compared to Q1 2020. lucrative incentives (such as waiving services charges or offer turnover rents as base rent, rent-free periods of up to six months with different contract periods) to retain existing retailers or attract new ones. Typical incentives offered in the market for street retail were in the form of rent-free periods of up to 3 months with differing contract periods, utility inclusive contracts and fully fitted offerings.

Median Monthly Asking Rents: Malls & Street Retail QAR/SQ M

260

250 252 248 246 246 240 240 240 238 234 230 230 230 230 230 220 210 210 205 200 200 220 195 190 192 182 180 180 180 178

210 172 172 170 168 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2018 2019 2020

Mall Rents Street Retail (Doha) Street Retail (Outside Doha)

Source: ValuStrat

17 | Qatar Real Estate Market 1st Half 2020 Review Retail Performance Tree

Occupancy (%) Monthly Rental Rate (QAR)

100% 230

90% 220

80% 200

70% 180 Performance

60% 170

50% 160

Street Retail (Outside Doha) Street Retail (Doha) Malls Source: ValuStrat

Median Asking Street Retail Doha

-22.6% -8.7% -2.2% -1.1% Last 2 Years Last Year Last 6 months Last Quarter

www.valustrat.com | 18 Median Asking Street Retail Outside Doha

-18.1% -6.7% -2.3% -1.2% Last 2 Years Last Year Last 6 months Last Quarter

Median Mall Rents

-7.3% -4.2% -1.7% 0.0% Last 2 Years Last Year Last 6 months Last Quarter

COVID-19: Trends

• On average, 8% of the total leasable area in malls was allowed to open including anchor tenants that sell food and pharmaceuticals. We estimated a monthly loss of an approximately QAR 1.5 billion in total sales from shopping centres due to the social mobility measures which were in place.

• Developers of major commercial complexes offered rent exemption for their commercial tenants in March 2020 for at least three months or until further notice. Restrictions began to lift in June 2020 with the implementation of Phase 1 by the government of Qatar.

• Restaurants in particular were hit hard by the pandemic, as out-of-home consumption came to a standstill, only delivery and takeaway was allowed during the first six months of 2020. These restrictions were also lifted in June 2020.

• Retail vendors reported challenges with cash flow management, rental collection was quoted as being the main problem.

• There was a significant increase in demand for food and grocery especially in March and April 2020 due to panic buying in light of uncertainty regarding social mobility measures. However, there was no report of major shortages of any food product. Significant increases in demand were met conveniently by effectively readjusting supply chain routes and using sufficient buffer stock already at hand. Another off-shoot was a reported increase in reliance on local Qatari food products.

• COVID-19 boosted e-commerce in Qatar. There was a noted increase in retailers across Qatar resorting to online trading platforms or home delivery services to improve transactions. Owners of malls also facilitated their tenants by modifying their websites to enable customers to connect directly with the retailers. Additionally, hypermarkets reported a surge in demand for online grocery shopping which resulted in an expansion of delivery services being offered.

19 | Qatar Real Estate Market 1st Half 2020 Review Hospitality Market

Hospitality Supply and Demand

• As per Qatar National Tourism Council (QNTC), Hotel Room Supply the total stock by end of 2019 was 27,261 keys 2017-2021 (130 hotels and hotel apartments). 24,562 keys (’000 KEYS) are hotel rooms and 2,699 are hotel apartments. 8.0 The five-star segment is the largest in size and encompassed 12,900 rooms across 49 3.0 properties at the close of 2019.

• As per ValuStrat research, 988 keys were added during H1 2020 with the opening of Pullman Hotel in West Bay, Imperium Residences in Najma, Dusit D2 Salwa Doha in Muraikh and Al Liwan Suites in and Diyafa Hotel 30.3 27.3 Suites in Al Sadd. 27.3 25.8 24.9 • As per Valustrat research, 10,000 keys are in pipeline till 2021. There were reported delays in the launch of hotels in 2020 due to uncertainty caused by the advent of COVID-19. As per the 2017 2018 2019 2020E 2021E latest statistics released by QNTC, a total of 21,500 rooms across 107 projects are under Hotel & Serviced Apt Rooms Expected Supply construction at various stages of development. Source: ValuStrat, MEED Projects • 2020 began with increasing visitor arrivals, up till February 2020 there were 498,528 arrivals, up by 32% compared to the same period in 2020. In March 2020 with the advent of the pandemic, government of Qatar imposed a ban on inbound tourists causing the volume of tourists to plunge. Moreover, all recreation facilities and F&B outlets in hotel properties were also mandated to close.

• Since March 2020, hotels had to rely on local residents for turnover. Hotel apartments were reported to fare well compared to hotel segment as they relied on long term leasing tenants. YTD June 2020 tourist arrivals totalled 548,812, down by 48% compared to the same period 2019.

• As per ValuStrat research, the gap between demand and supply at the end of 2019 was estimated at 9,000 keys. This is projected to increase by the end of 2020 depending on the recovery of tourist arrivals and influx of new properties. As per the plan of the lifting of restrictions in July 2020, hotels will be allowed to re-open their F&B outlets. In addition, once inbound travel will re-open in Phase 3, the government of Qatar mandated two weeks stay at designated quarantine hotels for particular inbound traffic.

www.valustrat.com | 20 Hospitality: Demand versus Supply High Medium Supply (Units) Low

Low Medium High

Demand

Hospitality Performance

• YTD June 2020, occupancy of hotels and hotel • Average Daily Rates (ADR) of hotels declined apartments fell 13% and 12% respectively, 2.4%, whereas for hotel apartments the decline compared to the same period in 2019. Occupancy was 9.3% as of H1 2020, compared to H1 2019. declined the most for 1-2-star hotels followed by ADRs fell the most for 1-2-star hotels followed by the five-star and four-star segment. 5-star segment and 3-star segment.

• The highest occupancy of 66% was recorded for • Revenue per Available Room (RevPAR) was 3-star hotels amongst all hotel properties as of recorded at QAR 192 per night for hotels and H1 2020. Hotel apartments had an average QAR 180 per night for hotel apartments, down on occupancy of 61% YTD June 2020. average by 22% annually during the first six months of 2020.

21 | Qatar Real Estate Market 1st Half 2020 Review Cumulative ADRs & Occupancy of Hotels and Hotel Apartments 2018 - YTD 2020

76 74 74 75 75 74 72 73 73 73 72 72 72 72 72 72 73 72 72 71 71 70 71 71 68 67 63 65 70 62 61

402 402 68 67 66 66 66 67 398 398 398 65 65

396 64 64 64

394 63 63 63

393 62 62 392 392 60 60 59 59 59 60 58 58 58 58 389 389 387 57 368 380 380

377 377 377 52 52 376 376 375 373 371 367 365 362 341 341 352 339 336 336 334 336 332 331 333 330 329 328 328 327 327 327 325 324 324 323 323 323 323 323 323 322 296 294 293 293 290 Jul Jul Oct Oct Apr Apr Apr Jan Jan Jan Jun Jun Jun Feb Feb Feb Sep Sep Nov Dec Nov Dec Aug Aug Mar Mar Mar May May May

2018 2019 2020

ADRs hotel Avg. Occupancy Hotel Apartment Avg. ADRs Hotel Apartment Avg. Occupancy Hotel Avg.

Source: ValuStrat, Qatar National Tourism Council (QNTC)

Hospitality Performance Tree

Occupancy (%) Average Daily Rate (QAR)

100% 380

90% 360

80% 330

70% 320 Performance

60% 310

50% 290

Hotel Apartments Hotels Source: ValuStrat

www.valustrat.com | 22 Occupancy Hotel & Hotel Apartments

-7.6% -12.9% -13.6% -10.4% Last 2 Years Last Year Last 6 months Last Quarter

ADR Hotel & Hotel Apartments

-8.3% -3.1% -4.1% 3.8% Last 2 Years Last Year Last 6 months Last Quarter

COVID-19: Trends

• With the advent of COVID-19 and mandated ban on inbound tourists, there was a significant decline in arrivals of up to 48% YoY which was not in line with the historical trend.

• There was a YoY decline in performance fundamentals of hospitality properties as a result: occupancy, ADRs and RevPARs.

• Hospitality properties had to rely on residents to increase occupancy. The majority of the properties announced “Staycation Packages” in May 2020 to attract residents for upcoming Eid festivals.

• During March and April 2020 there was a rise in residents occupying hotel apartments due to flexibility of short-term leasing contracts they offered.

• The full impact of the pandemic might only be known once the crisis ends. However, it is agreed upon that the negative impact on the hotel industry will be short to medium term.

• The recovery of the hospitality industry is centred upon how responsive the operators are to needs of the travellers in the long term. Healthy and safety techniques, policies and procedures will have to be reconsidered in order encourage guests back in their premises while changes in consumer trends will also have been studied in order to effectively elevate occupancy to pre-COVID-19 levels.

23 | Qatar Real Estate Market 1st Half 2020 Review How Can Help

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www.valustrat.com | 24 in Media

9th June, 2020 27th April, 2020 Qatar’s efforts to raise strategic stock of Residential sector remains attractive to real food commodities: ValuStrat estate investors: ValuStrat “Logistical challenges might also arise in the coming “Doha: Developers who are willing to sell properties months. There is a projected fall in the workforce during the COVID-19 crisis might provide favourable within the short to medium-terms, and due to the deals for the buyer in the form of discount on asking existence of social mobility measures, logistical sale prices. This coupled with reduced interest rates footprint will have to be planned out in order to reduce offered by banks has increased attractiveness of real delays in ‘last mile’ deliveries to consumers. In estate, particularly in the residential sector, as an addition, more businesses will be looking into E2E (End investment option, consulting firm ValuStrat Qatar has to End) or O2O (Online to Offline) supply chain visibility said in its latest quarterly report titled ‘COVID-19 & The and resilience. All of this will have to be taken in Qatar Housing Market’.” account, to make necessary changes in supply chain and support the growing e-commerce sector,” ValuStrat said.”

30th January, 2020 Hotels witness high occupancy in Q4 of 2019 3rd May, 2020 “Countrywide sales transaction volumes accumulated 8,600 residential units may be added in to QR22.7bn in value in 2019. In The Pearl & , transaction volumes increased by a staggering 72 Qatar by end-2020: ValuStrat percent during 2019, while total transaction value “Total housing stock by end of Q1, 2020 was increased by 55 percent to QR2bn,” Pawel Banach approximately 299,100 units with the addition of 900 (pictured), ValuStrat’s General Manager, Qatar told The apartments and 500 villas during the quarter, ValuStrat Peninsula.” said in its first quarter report on ‘Qatar housing market’. All new additions were during the first two months of this year, it said.”

25 | Qatar Real Estate Market 1st Half 2020 Review Market Intelligence. VPI Simplified. ValuStrat Price Index

Premium Subscription ValuStrat offers premium subscription reports for clients allowing them to access to in-depth, ValuStrat Price Index statistical analysis of what is happening in Qatar In-Depth Reports residential real estate; allowing for more informed decision making and forward planning. The full in-depth 100+ page Qatar report includes citywide analysis of freehold districts, including the ValuStrat Price Index, transaction volumes, service charges, Price to Rent Ratios and Net Yields. Also accessible via

About VPI

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 is a valuation-based weighted price index that uses a data sample representing influential locations across the city and Subscribe is built by our expert RICS Registered Valuers. for regular market intelligence 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 For subscription, please visit projects. Prices are calculated from actual transactions www.valustrat.com/vpi-qatar extracted from the Ministry of Justice data that have been or email at carefully cleansed to exclude duplicates and outliers. Rental data is derived from carefully chosen listings from [email protected] predetermined areas and districts for commercial and residential properties.

www.valustrat.com | 26 About

ValuStrat Qatar is part of a Strategic Partners of leading consulting firm Pawel Banach, FRICS providing Advisory, General Manager Valuation, Research, Due [email protected] Diligence, and Divestment Financial Institutions services across a diverse range of industry sectors since 1977. Haider Tuaima Head of Real Estate Research ValuStrat’s office network provides services to over [email protected] 1,000 corporate clients including financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups.

Some of the key sectors serviced by ValuStrat’s Anum Hasan consulting team include real estate, hospitality, Market Research Manager healthcare, education, manufacturing, retail, [email protected] 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 Anthony Fernando, MRICS prestigious RICS Tech Affiliate program. Property Valuation Manager [email protected]

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