Strong baseline indicators support growth in Qatar's retail market

With strong foundations in a thriving economy, a young population and a maturing consumer base, Qatar’s retail sector looks set to maintain robust growth as the country continues to develop into a major regional centre for trade and commerce. Qatar is among the world’s wealthiest countries on a per capita basis, with GDP per capita estimated at $93,714 in 2013, according to the World Bank. High levels of disposable income have driven consumption, benefitting the retail sector. Prices for space in prime retail locations have remained relatively steady over the last three years, indicating that supply has continued to meet demand. Retail developments such as malls and other shopping districts have been booming, with a number of mega-projects in the pipeline for delivery over the next two years. While the non-mall retail sector makes up the vast majority of retail space in Qatar at present, current trends suggest that malls and other organised retail services will overtake this segment by 2018.

BUILDING MOMENTUM: Favourable government policies and investments also provide critical support. Qatar National Vision 2030 and the Qatar National Development Strategy 2011-16 both stress diversifying the economy away from oil and gas. Retail and other services are a critical part of this strategy, and the government has invested significantly in infrastructure such as roads, airports, seaports, power and other utilities that have helped drive growth in retail. Major events like the 2022 FIFA World Cup also provide momentum, and the event has helped to set a firm timeframe for completion of large-scale infrastructure projects. The resulting surge in construction activity is also creating a host of new opportunities for retail companies. “A large portion of the retail industry is being impacted by the current construction drive. Qatar is not just creating new developments, it is revitalising all of existing Doha.” Khalid Abdul Hamid Al Emadi, executive manager of Al Emadi Group, told OBG. “A large portion of the work is private, including residential, hotel and office projects, all of which require retailers to supply them with appliances during the fit-out, so the outlook is positive and we expect 2015 to be a big year.”

CONSUMER DEMOGRAPHICS: Rapid population growth, driven largely by a burgeoning expatriate community, has continued to expand the consumer base. Qatar’s population reached 2.22m in 2015, growing by 9.5% on the previous year, according to the Ministry of Development Planning and Statistics (MDPS). Qatari nationals account for roughly 12% of this figure, or an estimated 273,000 in 2014, according to Qatar National Bank (QNB). Citizens from South Asian countries, including India, Nepal, Bangladesh and Sri Lanka, make up more than half of the population, according to government estimates. Most of this expatriate workforce is male, which distorts gender figures at the national level; females represent 24% of the total population. The population is young: those between the ages of 20 and 39 account for more than 57% of the total, and are dominantly male, according to QNB.

INCOME & SPENDING: The bulk of the expatriate workforce is employed in the service and construction industries. However, according to QNB research, some $13.5bn was remitted out of the country in 2012, indicating that many foreign workers tend not to invest or spend their earnings locally. As such, it is middle- and high-income expatriates and Qatari nationals who are the retail sector’s main target market. While income distribution figures show that much of the country’s wealth is concentrated within a minority of the population, the average monthly salary for Qatari men and women is still quite high at QR29,000 ($7949) and QR21,000 ($5756), respectively, according to the MDPS. The MDPS recently released the results of its “Household Expenditure and Income Survey”, which highlights that the average Qatari household earns QR72,700 ($19,927) a month, considerably higher than the average of QR24,400 ($6688) for expatriate households.

One reason for this difference is that Qatari households are generally larger. However, the source of income is also significant; salaries and wages accounted for 67% of the average Qatari household’s income compared with 97% of an average expatriate household’s income. Government support for Qatari families including housing discounts and free electricity and water, for example, increases the real Qatari household income to QR88,200 ($24,175). The survey also revealed patterns in the expenditure of Qatari and expatriate households. A Qatari household spends an average of QR49,600 ($13,595) per month, while an expatriate household spends QR18,000 ($4934).

BANKING ON MALLS: Developers in Qatar have invested heavily in tapping into this consumer base by expanding the available retail space. Broad retail categories include organised retail in malls, standalone showrooms and traditional markets or souqs. The latter two categories dominate the retail space currently available in the country, accounting for an estimated 70%, according to the first-quarter 2014 “Qatar Real Estate Report”. However, Qatar has seen a visible shift from small-scale “unorganised retail stores” towards malls. The first-quarter 2014 “Qatar Real Estate Report” notes that the share of retail space lying within malls will expand from an estimated 18% to more than 65% once all the malls currently in planning open for business.

The latest DTZ “Property Times Report” estimates that there is currently 590,000 sq metres of gross leasable area (GLA) within organised retail market spaces in Doha alone. This space is distributed across 13 shopping areas. DTZ reports that the majority of retail mall space is occupied, and there are waiting lists for most of the premium malls. Strong demand for space, particularly in the premium malls, continues to support high rental rates. DTZ reports that rental prices at the more popular malls can range from QR220 ($60) to QR250 ($70) per sq metre per month for shops that utilise between 100 and 250 sq metres of retail space. Anchor stores, which are a prominent feature and often the key driver of footfall in Qatar’s malls, can be as big as 5000 sq metres, with rentals ranging from QR40 ($11) to QR80 ($22) per sq metre per month.

The City Centre and Villagio malls dominate the available organised retail space, accounting for over 42% of total retail supply. City Centre opened in 2001 and is one of Doha’s leading shopping centres thanks to its central location in the West Bay area. The mall has four retail floors offering 120,000 sq metres of leasable space and 370 stores. It is owned by local group Aamal and was one of the first to introduce an indoor amusement centre to attract families. It targets a mix of middle- to upper-middle-income local and expatriate patrons and has maintained its popularity. This is largely due to its location and the success of its anchor store, Carrefour. Germany’s European Consulting and Engineering Company, a retail property management firm, has managed the property since 2004.

Villagio is currently the largest mall in the country and is located in Aspire Zone, the capital’s sports city. The mall opened in 2006 and offers almost 130,000 sq metres of leasable space within 360,000 sq metres of space designed with an Italian theme, including indoor Venetian canals and gondola rides. An average of 42,000 people a day visit the mall, resulting in a monthly footfall of more than 1.2m. The mall targets wealthier customers, and luxury brands, including Louis Vuitton, Christian Dior, Gucci, Prada and Dolce & Gabbana, account for almost 15,000 sq metres of the retail space, while the remainder is distributed between various shopping brands and the anchor Carrefour store.

The Landmark mall, which opened in 2000 with expansions in 2005 and 2008, is the next biggest mall currently in operation with a total of 58,000 sq metres of leasable retail space. The mall reports that between 60% and 70% of its customers are Qatari nationals, while 30-40% are expatriates. The Hyatt Plaza mall and The Mall – Qatar’s first mall – round out the five largest organised retail spaces, with 30,000 sq metres and 22,000 sq metres of GLA, respectively. Other malls in operation include The Centre, Lagoona Mall, The Gate, Royal Plaza, Centrepoint, Dar Al Salam Mall, West End Mall and Ezdan – one of Qatar’s newest malls.

EXPANDING RETAIL SPACE: The retail landscape is going to change dramatically over the next three years as a number of retail mega-projects come on-line. DTZ data suggests that the total GLA in Qatar’s organised retail sector is going to almost triple from 590,000 sq metres to more than 1.7m sq metres by 2016. DTZ estimates that the country currently provides almost 300 sq metres of organised retail space per 1000 people, which compares favourably to the average of 200 sq metres in Europe, but is behind regional retail competitors such as Dubai and global retail markets like the US, both of which offer more than 1000 sq metres of retail space per 1000 people. A total of 14 new malls are in the pipeline and are set to add more than 1m sq metres of retail space over the next three years, which will bring Qatar’s retail offerings in line with Dubai.

The UAE’s Al Futtaim Group has partnered with three Qatari entities to open Doha Festival City (DhFC), its first retail and leisure destination in Qatar, in September 2016. At a total cost of QR6bn ($1.64bn), the project will add more than 244,000 sq metres of leasable space within a total area of 433,000 sq metres. Its initial phase has already opened to house Ikea’s first store in Qatar. The 32,000-sq-metre Swedish furnishing outlet serves as one of the mall’s key anchor stores, and is likely to help attract significant customer traffic. As of February 2015, some 25% of the project was complete, including all enabling works and underground construction, and vertical construction was under way. Around 80% of mall space had reportedly been leased.

MALL OF QATAR: A second retail mega-project is the Mall of Qatar, scheduled to open in early 2016. The project, which cost more than QR4bn ($1.1bn), excluding the cost of land, is set to include a hypermarket, a multiplex, a Curio by Hilton hotel, four department stores, 82 food and beverage outlets, and 400-plus shops spread across more than 500,000 sq metres of space.

The facility will have more than 195,000 sq metres of retail space with a dedicated area for luxury brands.

The project recently awarded a QR400m ($109.6m) contract for mechanical, electrical and plumbing services to Drake & Scull International, suggesting it is on track to open on schedule. The Mall of Qatar has also selected Cinemacity, a major global cinema operator, to build the country’s largest cinema, which will include an IMAX theatre and 19 screens with 3000 seats.

In addition, the mall will also be anchored by 16,500 sq metres of entertainment area that will feature an Kidzmondo theme park, among other attractions. As of February 2015, 70% of the project had been leased.

The mall will serve as a regional retail centre and has a target of attracting at least 10% of its total footfall from neighbouring GCC countries.

At the other end of the spectrum, Qatar Property Management will also be opening Doha Outlet Mall in 2015.

The facility will be smaller than the Mall of Qatar or DhFC but will offer shoppers the chance to buy global brands at discounted prices. The mall will have 20,470 sq metres of floor space and feature four department stores, 170 fashion outlets, and specialty stores for electronics and other goods. Another new mixed-use development is expected to open in the third quarter of 2017 in Lusail City, 11 km north of the Doha city centre. Place Vendome, at a cost of QR5bn ($1.37bn), will cover over 800,000 sq metres, including 230,000 sq metres of leasable area, and offer serviced apartments and two five-star hotels, among other things.

LUXURY BRANDS: While Qatar’s retail market continues to mature, diversify and, increasingly, compete regionally, one segment that shows no signs of slowing is the luxury sector. The rapid growth of the economy has provided luxury retailers with a large and wealthy consumer base concentrated in and around Doha. American Express Middle East estimates show that Qatari nationals are the GCC region’s biggest buyers of high-end merchandise, spending up to $5000 a month on luxury goods. Generous government support for Qatari nationals, such as the 60% raise in salaries in September 2011 for those employed in the public sector, is likely to continue supporting these levels of spending within the luxury market.

TRADITIONAL WEAR: Among the important local brands is the provider of traditional Middle Eastern garments, Al Motahajiba. The firm is the leading retailer of traditional wear in the region and is owned by Al Siddiqi Holdings. The company has the largest garment factory in the GCC, based in Qatar, and in the MENA region it is the best-known manufacturer of the abaya, a full-body cloak for women. Al Siddiqi has focused its strategy on innovative women’s traditional wear, introducing new colours, patterns and designs to the historically black ensemble. The firm is a good example of diversification efforts in Qatar and exemplifies efforts to modernise and brand retail products that have an appeal specifically among Middle-Eastern cultures.

AUTOMOBILES: The automobile market is another important growth segment. While the volume of cars sold was down following the onset of the financial crisis in 2008, it has since recovered and sales are expected to increase significantly going forward. Mohammed Jaidah, executive group director of Jaidah Group, told OBG, “2008 is considered to be the record year for the automotive sector in Qatar. Activity was limited until 2013, while in 2014 the market is expected to expand to the levels seen in 2007-08. In terms of specifics, volumes are expected to double in the next five years, from 70,000-80,000 cars sold annually to around 160,000 – bigger than Kuwait’s current automotive market.”

OUTLOOK: The Qatari retail market faces a number of challenges over the next few years as competition for consumer spending heats up. The rapid increase in retail space will be hard for malls to manage, especially as brands become more selective about where to showcase their offerings. Nevertheless, the outlook for the retail sector remains positive. The country ranked 11th on EC Harris’s Retail International Programme Expansion Index, second only to Saudi Arabia (8th) among GCC states, indicating the extent to which it continues to be an attractive destination for retailers.