Cushman & Wakefield : COVID-19 Impacts on Qatar Real Estate

Maria Maximova, MSc
Senior Research Analyst
Cushman & Wakefield Qatar

The second phase of Qatar's reopening on 1 July saw the lifting of most restrictions on malls, museums, and libraries. The F&B sector saw the reopening of restaurants, albeit at reduced capacities and for limited durations per reservation. Beaches and parks have started to reopen, with social gatherings of up to 10 people now permitted. Offices can now return to 50% of capacity, which is seeing an increase in traffic volumes throughout Doha.

The relaxation of restrictions is resulting in the retail and F&B sectors slowly returning to normal. The 'Google Mobility' (Google Maps) data is available up until the end of June, with the data capturing the duration of the first phase. Generally, the data shows that mobility patterns have been gradually increasing since the Eid holiday. The 'grocery and pharmacy' category was up by 20% above the base period, unlike other retail which still showed negative numbers. Given the high traffic upon malls reopening, we expect that much of this activity is captured under 'grocery and pharmacies'.

25 June

'Google Mobility' (Google Maps) data has been made publicly available to track visitor numbers to specific locations in Qatar. The information is available up until 14/06/2020, a day before the start of the first phase of reopening. The data shows that supermarkets and pharmacies maintained footfall at 20% above the pre-lockdown level, with the 'Retail' sector improving to -15% compared to the baseline period. Public parks saw a further rebound to -2%. 'Workplaces ' category grew to -13%. People staying at home reduced to just 15% more than the pre-lockdown period.

Retail malls partially reopened this week, providing a glimpse into the recovery of retailing in Qatar. Generally, the pre-lockdown levels returned - with prime malls enjoying a healthy return of footfall, although some second-tier malls struggled to attract customers in large numbers. Operationally malls face new challenges such as pent up demand because of a combination of three months' closure, limited working hours, and restricted parking, resulting in traffic congestion at busier times. Department and fashion stores were limited by restrictions to their cosmetics departments and to changing facilities; however, it is expected that these restrictions will ease over the coming months.

18 June

The dates for the phased reopening of the commercial sector were announced as well as further refinements. The first phase will begin on 15 June, followed by 1 July, 1 August and 1 September for the second, third and fourth phases respectively. Some non-essential shops will reopen this week. This will be restricted to non-F&B units above 300 sq m to operate only during the working week until 8pm. Retail malls have published lists of stores that will open. Selected parks are also reopening for exercise only.

'Google Mobility' data is publicly available based on the Google Maps phone application. It tracks the drop or increase of visitors to certain locations compared to the baseline period. The 'Grocery and Pharmacy' sectors rebounded further to reach 20% above the pre-lockdown level. While there have not been any changes to this category in terms of further relaxations, it may reflect the fact that there is a higher visitation to supermarkets and pharmacies because of lower perceived risk. Likewise, ahead of the restrictions being lifted this week, public parks have seen a rebound to -4%. This was mirrored by a decrease in people staying at home to 15%.

11 June

While the Government 'Ehteraz' contact tracing application data is proprietary, 'Google Mobility' data is publicly available. It tracks the drop or increase of visitors to certain locations compared to the baseline. The 'Workplaces' category continued to trend down, showing the largest drop of 74% due to an extended Eid break for the public sector. This was mirrored by a spike of 34% of people staying in. On the last day of Ramadan, 'Grocery and Pharmacy' rebounded to almost pre-lockdown level (-2%).

Cafes resumed take away orders, previously only restaurants could do so. While the difference between cafes and restaurants might be considered minor, the categorisation impacted their ability to trade during the COVID-19 lockdown. For some tenants a reopening has coincided with the end of their rent relief period. Mall of Qatar, a super-regional mall, has announced that an extra month would be added for their tenants in addition to the three months already granted.

Increased demand for food delivery has helped F&B operators unlike the other retailers; however, the former are faced with steep commissions by delivery companies, sometimes exceeding 30% on each order. Cafes are now exploring new formats, such as delivering DIY meal kits to be cooked at home.

4 June

The Qatari Government has unveiled a mandatory contact tracing app which tracks people's location through their mobile phones. It is starting to be used to gain entry to some supermarkets and hospitals. At the same time more details have emerged around the country's 'recovery readiness' plan to reopen the economy in 4 phases as follows:

• First phase, likely to happen by mid-June, permits 'high value' shops to open (restricted hours); school exams and 1:1 sessions to take place and restricted private healthcare to resume.
• Second phase, possibly to start by July, allows for reopening of beaches, parks, museums, and libraries; all retail outlets including traditional markets apart from F&B and leisure (restricted hours).
• Third phase, probably to happen by August, indoor sports up to 40 people as well as restricted inbound flights (only outbound ones allowed under earlier phases) resume; full operation hours for malls and markets apart from entertainment but including hairdressers, gyms and pools; an increase to 40% of office employees at a workplace from the current 20%.
• Fourth phase, likely to start by September, presumes more inbound flights, cruise ships, limited public transport, F&B restricted operation as well as 'gatherings and sports' activities such as cinemas and mass sports events.

28 May

Qatar Development Bank (QDB) allocated guarantees to local banks at an amount of almost USD 1 billion under the National Response Guarantee Program. The program is a 100% guarantee scheme of the Government of Qatar to help mitigate Covid-19 impacts by relieving the most critical short-term payments private sector employers will face during the next three months as it includes staff salaries and rent. Initially real estate, construction and contracting sectors were excluded from the National Guarantee Program; however, it was announced last week that construction and contracting would be included in addition to extending the interest free period to 1 year.

Prolonged Eid holidays started last week for the public sector. Additionally, all standalone retail outlets have been ordered to shut down until the end of the month with an exception of grocery stores, pharmacies and F&B (take away only). At the same time a 'recovery readiness' plan has been announced by the Government, consisting of four phases, likely to take place over summer. It features staggered re-opening of different sectors, with the final phase permitting flights, cruise ships, limited public transport, F&B restricted operation as well as 'gatherings and sports' activities such as cinemas and mass sports events.

21 May

The Industrial Area of Doha partially reopened this week, having been under quarantine for almost 2 months. This area has the largest concentration of warehouse and logistics buildings in Qatar, and its lockdown had a significant impact on Qatar's domestic economy.
A recent increase in new Coronavirus cases suggests that it will be some time before most businesses can start to reopen to customers. Retail and restaurant restrictions remain largely in place, although F&B outlets may now resume their take-away service. Restaurants had previously been restricted to delivery service only.

Currency exchange houses were permitted to reopen this week. These exchanges play an important role in the GCC due to the high concentration of foreign workers sending cash remittances home.

In order to reduce the dependence on cash transactions, Central Bank has increased the limit on contactless card payments. They have also issued guidance to domestic workers to utilise their bank accounts rather than relying on cash. Meanwhile, some banks introduced specific policies in terms of handling cash and cheques from their customers to reduce the number of visits to a branch. Cheques remain a widespread form of payment throughout the Gulf region; however, the COVID-19 pandemic is now accelerating the transformation to on-line banking services and electronic transfers.

14 May

The impact of the coronavirus on the commercial office market has been limited to date. That is mainly due to activity in the sector being driven by lease events such as lease expiries, which still need to be acted upon. Occupier relocation projects that started before the COVID-19 measures were introduced are mainly progressing as planned. Tenants are still able to access their offices, subject to government guidelines of reduced staffing and hours; therefore, there have not been multiple announcements by landlords on rent relief.

Amenity provisions in residential developments have been ordered to close, while service staffing levels have been reduced to a skeleton staff in many cases. These measures, together with social distancing restrictions, are making it challenging to lease property. As health and safety concerns increase, leasing agents are increasingly turning to virtual tours to market their properties.

Ramadan ends with the Eid holiday which can take up for a week for the public sector. Hotels, malls, and the F&B sector are usually very busy around this time, but whether the restrictions would be lifted by this time is yet to be seen. The hotel statistics, only available up until April, are yet to fully incorporate the lockdown effect. Anecdotal evidence may suggest that, with the Government taking over several hotels to use for quarantine purposes, occupancy levels may in fact show an increase.

7 May

The onset of Ramadan has not changed much with many businesses already working reduced hours and the F&B outlets open for take away only. Qatar is well adapted to restricted hours during the holy month. Since Google Maps is a global equivalent of a retail footfall counter, with the data now being made available, the effects of both can be quantified.

On a Thursday night, there has been an increase in people staying in, with almost 30% staying more at home in general. While Friday afternoon and late evening are normally the busiest times for the malls, street retail (weather permitting) and museums, this category has seen a drop of 72% in visits, even before Ramadan. Not surprisingly, 70% fewer people made it to the parks on the first day of Ramadan.

As for the groceries and pharmacies, the only stores permitted to trade 7 days a week within a mall, the maximum decrease of visits on Friday was 47%. By the second week of April, it appears that many employees got used to working from home as there is no drop in Saturday visits to a workplace anymore, with an overall decrease of visits of just under 40%.

30 April

Despite the restricted hours of Ramadan, it is normally a busy time for supermarkets and F&B outlets (after sunset), including those based in hotels. Ramadan tents are being set up, serving iftar and suhoor meals for companies and families until late at night. The F&B sector is an important part of the retail scene throughout the year in Qatar like elsewhere in the Gulf for locals and expatriates alike.

This Ramadan is going to be different with F&B retailers already hit with even tougher pandemic restrictions. Not every outlet was able to adapt quickly to work for take away only, while simultaneously losing cashflow. Fortunately, it appears many landlords recognised it, having granted rent relief to their tenants, particularly F&B ones, for several months.

Additionally, some sectors have been exempted from electricity and water charges (provided by a government monopoly) for 6 months: retail, hospitality and tourism, some SMEs, commercial and industrial provided it trickles back to their tenants.

For many F&B tenants, even service and marketing charges are detrimental to their cash-starved business, with the online/phone orders often accounting for a very small share of their prior revenue. Meanwhile, the delivery companies have capitalised on an unprecedented demand.

23 April

Qatar started implementing lockdown measures on 17 March, announcing a US$20 billion aid package shortly afterwards. In terms of resilience the 2017 blockade by the neighbouring countries has been an important learning experience for Qatar.

The immediate effect has been on the hospitality and retail industries with the airport and malls almost completely shutting down. The grocery sector along with pharmacies and food delivery have all seen sales growth.

The Government and semi-Government entities announced rent relief for their retail and/or F&B tenants either for 3 to 6 months starting from March or April or until further notice with the private landlords to follow suit. Still many employers in the affected industries started to furlough staff, reduce salaries or make people redundant.

As a result, residential landlords have started working out policies on deferring rental payments or providing temporary/permanent discounts. On the other hand, some people are using this time to upgrade their current accommodation as now they are spending a lot more time at home, some with their children.

The commercial sector has seen many transactions put on hold or rent commencement dates pushed forward, many tenants are considering serviced office options instead of conventional offices.