Buyers and tenants will govern the housing market due to oversupply in Oman this year, despite strong demand on the back of high oil prices and robust economy, according to the findings of a leading property consultant.
Cluttons, the leading real estate experts in Oman, in its latest report offers a 'look ahead' at 2012, highlighting a number of property trends across the residential, commercial, retail and industrial sectors in Oman. Average tenant budgets have fallen over recent years while, conversely, the expectations of tenants have risen as they seek greater quality and value for money.
"Tenants will continue to look for well designed and built properties with features such as good quality fixtures and fittings, outdoor space, excellent maintenance and leisure facilities," said Cluttons. It is apparent that tenants are increasingly willing to compromise on the size and even location of a property rather than on its quality. Cluttons foresees a two-tier market continuing to develop where well designed properties suited to tenant desires have relatively stable rental values and high occupancy rates while properties which are poorly designed or built have declining rental values. Commercial The vast majority of office stock in Muscat is Grade B or C with a limited availability of Grade A space.
This will change over the coming year as a number of large scale, Grade A office developments are due for completion in the near future. Four recently or soon to be completed developments alone will add approximately 158,000 square meters of Grade A office space to the market. Due to the increasing oversupply of office space, Cluttons predicts that rental values for office space will continue to soften as new office space enters the market. Demand for office space in the capital area will remain relatively steady over the next 12 months. The majority of demand will remain, however, on smaller spaces of up to 500 square metre: flexibility in office space design to cater for smaller space occupiers will be vital. Suitable car parking facilities will remain a key feature in attracting office space tenants. While there is strong interest in Grade A office space, many tenants will continue to be unwilling to pay a significant premium in comparison to the rental values for Grade B space in the same area. Retail Muscat has approximately 300,000 square meters of retail space in purpose-built retail centres.
The figure does not include a large number of ground floor retail units and showrooms in mixed-use buildings as predominant in areas such as Ruwi, Ghubrah North and Al Khuwair. Over the next 18 months, developments under construction will deliver an additional 100,000 square metres of good-quality, retail mall space. However, Muscat City Centre will continue to dominate the retail mall sector in terms of footfall and rental values.
Cluttons is predicting continued demand for smaller retail space, in particular from the food and beverage sector - where potential retail tenants are searching for space within successful shopping destinations - attracted by proven footfall and/or in prominent locations with ample car parking provision. Demand will remain strong for established shopping malls with proven footfalls but that some of the newer retail malls will continue to perform below expectations. Industrial Cluttons predicts continued growth of the industrial and logistics sector, with the ongoing development of shipping ports, free-trade and industrial zones in Salalah and Sohar.
Demand will remain strong and rental rates steady for warehousing in the Muscat and Batinah areas, as supply of warehousing in the rental market remains constrained.