By Shane McGinley
Landlords must offer incentives to retain tenants as new homes come online, warns Cluttons
Landlords in Oman will need to offer better perks to attract tenants as the release of new supply puts downward pressure on property rents, real estate consultancy Cluttons said.
The sultanate risks developing a split property market with owners of villas and apartments in older, badly-maintained developments struggling to attract new residents, Cluttons analysts said.
“In 2012 landlords will have to work harder to compete and provide real value for money by meeting tenant expectations,” analysts wrote in a report, warning of the risk of a two-tier market.
“Well-designed properties [will] have relatively stable rental values and high occupancy rates while properties which are poorly designed or built have declining rental values.”
Oman has an estimated $2.5bn worth of real estate projects under development.
Though not as badly hit as the neighbouring UAE, Oman has not been immune to the GCC-wide real estate downturn. Its flagship development Blue City stalled in 2009 after suffering poor sales, and is now the subject of a legal battle between the project’s owners.
The $20bn development was intended to span 200 villas, 5,000 apartments and a number of hotels and golf courses.
Rival luxury housing project The Wave, located in Muscat, said last year it would press ahead with construction despite slow sales following the financial crisis.
The $3.5bn project had 3,000 properties left to sell in Q1 of 2011, and had moved to downscale its homes to reflect the economic climate.
Oman’s commercial market is also set to see an influx of supply in 2012 as some 158,000 sq m of office space is absorbed into the market.
The added buildings are likely to push lease rates down as tenants upgrade to prime commercial properties with little impact on their pockets, said Cluttons, adding that landlords may need to offer rent-free periods or staggered rent payments to attract residents.
“Due to the increasing oversupply of office space… rental values will continue to soften as new office space enters the market,” analysts wrote.