Qatar’s retail sector is expected to be the fastest-growing in the region over the coming years as more modern malls, supermarkets and hypermarkets open their doors, according to a new report.

In Alpen Capital’s latest GCC Retail Industry Report, Qatar’s retail market is forecast to grow on average 9.8 percent annually between 2013 and 2018. That’s considerably higher than its Gulf neighbors, which are expected to have an average growth rate of between 6 and 7 percent each year over the same period.

Supermarkets and hypermarkets, which the report describes as being “relatively underdeveloped in Qatar,” are one of the key sectors driving Qatar’s retail expansion.

It forecasts their growth in Qatar will be 12.1 percent on average annually until 2018, in part due to more international brands set to open stores in the state. For example, Spar Group’s license agreement with Khimji Ramdas Group will enable it to expand in the region, and “a major share of this investment is directed towards Qatar,” the report adds.

Qatar’s ongoing population boom, its young, international demographic and its infrastructure development ahead of the 2022 World Cup are also factors in the projected increase in supermarket sales for the coming years.

Other trends which will contribute to the growth include more residents in the region who are increasingly willing to spend more on healthy and also pre-prepared foods.

Across the Gulf as a whole, sales from super- and hypermarkets are expected to hit US$59.3 billion by 2018, showing an average annual growth of 9.2 percent.

Growth factors

Throughout the region, but particularly in Dubai, the growth of luxury sales – designer fashion and accessories, brand-name watches and jewelry, and perfume – is another factor driving overall retail growth.

While the report describes Qatar as a “growing market for luxury retail,” it notes that most Qatari customers prefer to shop in London, New York, Paris, Milan or Dubai. The report does not suggest a reason for this, although prices for designer goods in Qatar are generally higher than in those cities cited, and the range of stock here can be more limited.

One of the most significant factors contributing to the growth of retail in the region is the construction of more modern shopping malls, which are increasingly favored by many people over small shops and souqs due to the ease of parking and climate-controlled environment. The reports notes:

“Given the current under supply and vast potential, Qatar may see substantial growth in its retail space over the next few years.”

It predicts an annual average rise of 7.9 percent on the space dedicated to “modern retail sales” in Qatar, or malls, from 445,600 square meters in 2013 to 651,200 square meters by 2018.

There are a significant number of new shopping malls currently under construction in Qatar, which are set to open within the time period in question.

Gulf Mall, near Ezdan on the Expressway, has 160,000 sq meters of retail space and is set to open early this year. Meanwhile, Tawar Mall – near Landmark – is about half that size. It was slated to open at the end of 2014 but is still under construction.

Further north on the Expressway, North Gate mall will have 100,000 square meters of leasable space, although it is also some way behind its scheduled opening of last year.

Mall of Qatar and Doha Festival City are among the biggest malls set to open their doors in the coming years, by the end of 2015 and September 2016, respectively.

Meanwhile, Lusail City is set to get Marina Mall, by the waterfront, as well as around 400 stores within the US$1.25 billion Place Vendome development, which is scheduled to open in 2017.

But with all these new openings, there will be casualties. A report issued by retail estate brokerage firm Colliers International in late 2013 warned that as supply starts to exceed demand, vacancy rates particularly in some of the older malls will increase and it will force landlords to cut rents.

Still, more new malls mean more opportunities for international brands to secure premium locations and this could further diversify the existing range of stores in Qatar in the coming years, meaning more choice and a wider range of goods for shoppers.

Thoughts?