By Andy Sambidge
New Cluttons report says demand is likely to outstrip supply for prime office space in Omani capital
Rental values for prime commercial property in Muscat, Oman is likely to drift upwards during the remainder of 2014 as demand begins to outstrip supply, Cluttons has said in a new report.
The real estate consultancy said Muscat's commercial property market is showing signs of continued stability driven by government investment in transportation and energy infrastructure.
It said in the report that occupiers are being drawn towards higher quality Grade A office space, adding that the supply and demand equilibrium for space is now nearing a "tipping point", with the delivery of new stock starting to fall behind the level of demand.
Philip Paul, head of Cluttons Oman, said: "At Beach One in Shatti Al Qurm, for instance, we have achieved 80 percent occupancy since the building was brought to market two years ago, highlighting the depth of demand for Grade A office space. We have experienced a similarly quick pace of lettings for offices at Saud Bahwan Plaza in Al Ghubrah."
Due to a significant investments being made by the government to also upgrade the Sultanate's port facilities, the report points to an expected increase in the demand for warehouse and industrial space this year.
With the relocation of the freight container terminal from its existing location in Port Sultan Qaboos in Muscat along the coast to Sohar, planned for later this year, it is anticipated that the latter will emerge as an activity hotspot, Cluttons said.
Cluttons added that it anticipates that occupiers will rush to reposition themselves around the new port and this will help to remove some of the freight traffic from Muscat's already congested road network.
In the hotel sector, the Cluttons report said a substantial supply pipeline of four- and five-star hotel rooms are expected in the next five years, adding that there was a "strong danger of oversupply, which may translate into increased downward pressure on room rates".
Paul added: "Given the expected oversupply of luxury high end hotels, we see a significant opportunity for mid-range three and four star hotels to expand in Oman and this will present new development opportunities as the sector continues to mature.
"We believe that a diverse range of hotel offerings will add further impetus to Oman's already growing reputation as a holiday destination."
On the retail market, Cluttons said a number of large scale mall developments are currently underway with the current estimated supply of approximately 350,000 sq m of leasable space within shopping malls set to expand by a further 35 percent over the next two years.
"We expect to see developers increasingly focused on the creation of smaller neighbourhood malls with leasable areas in the region of 3,000 to 10,000 sq m aimed at servicing the retail needs of the surrounding population. The first of these neighbourhood malls, Al Marsa Village, is set to open later this year at The Wave, with several more likely to follow," added Paul.