Cluttons real estate and commercial property analysts are predicting gains in both markets in Oman thanks to a strong economy fueled by rising oil prices. Demand is strong for Grade A office space, retail space and industrial accommodations throughout the region, and rental rates remain competitive in the residential real estate sector due to increased growth. An oversupply in homes for sale is tempering demand among homebuyers and creating more incentive for properties in good condition with attractive amenities, but it is not expected to negatively impact growth or prices. For more on this continue reading the following article from Property Wire.
Buoyed by high oil prices and a robust economy, the residential property market in Oman is set to remain strong in 2012 but, under the constraints of a continuing oversupplied market, buyers and tenants will very much be governing the sector, according to a new analysis.
Cluttons, the leading real estate experts that has maintained a steady offering in Oman since 1986, says that while average tenant budgets have fallen over recent years, 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. 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 and increasing voids. In 2012 landlords will have to work harder to compete and provide real value for money by meeting tenant expectations.
The sales market will continue to be fluid and somewhat unpredictable with both buyers and owners playing a waiting game within the residential property market. With new projected plans for housing scheduled to go online in 2012 in the local and ITC markets, Cluttons is, however, cautiously optimistic about the growth of the residential sales market for 2012.
In the commercial sector the vast majority of office stock in Muscat is Grade B or C with a limited availability of Grade A space. Cluttons believes that 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 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 meters. Cluttons adds that 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.
‘It is evident that the supply of office space in the Muscat capital area will accelerate significantly over the coming year. In an increasingly competitive market, landlords will need to adopt proactive leasing strategies in order to secure tenants,’ its report says. Methods that Cluttons expects to see increasingly used include initial rent free periods or stepped rents over the term of the lease. High quality, professional property management will be vital in attracting and retaining tenants.
Muscat has approximately 300,000 square meters of retail space in purpose built retail centres. This 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 meters 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, says Cluttons.
Cluttons is also 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 and be less attractive to potential tenants.
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. With greater certainty on the development of the new industrial city at Duqm, increased clarity from the government as to plans for the development of the industrial and logistics sectors, and continued investment in transport and power infrastructure will help to drive forward the development of the industrial and logistics sector.
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. There will be an increasing demand for bespoke, international quality warehousing facilities as more companies are drawn the Sultanate, seeking modern and efficient facilities. Cluttons expects to see an increased development of warehousing, particularly in the Barka area and new industry free zones in Salalah and Sohar.
This article was republished with permission from Property Wire.