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Report: Oman property market becoming two-tiered

by CW Staff on Apr 5, 2012

Landlords will have to work harder to compete, provide value.
Landlords will have to work harder to compete, provide value.

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Oman will continue to develop a two-tiered property market with villas and apartments in less desirable destinations providing difficult to rent, property consultants Cluttons has said.

Demand for residential real estate in the Gulf state is expected to remain strong in the year ahead, the firm said, adding it is “cautiously optimistic” about the growth of the residential sales.

“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,” said the report.

“In 2012 landlords will have to work harder to compete and provide real value for money by meeting tenant expectations,” it added.

Demand for properties in Oman waned after the global financial crisis battered neighbouring markets in Dubai and around the Gulf. Tighter lending also reduced sales for Oman property developments, which offer freehold ownership and residency visas to homeowners.

The real estate market is starting to show early signs of a recovery after seeing prices plunge 25 percent from their peak, real estate analysts have said.

Office rates in the Gulf state are expected to soften as some 158,000 sq m of Grade A office space enters the market, said Cluttons. Demand will remain strong in Muscat and for small offices of up to 500 sq m.

“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,” said the report.

“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 added.

Demand for smaller retail space is be strong with particular interest from food and beverage sector retailers. Over the next 18 months developments under construction will deliver an additional 100,000 sq m of good quality retail space.

“Demand will remain strong for established shopping malls with proven footfalls but some of the newer retail malls will continue to perform below expectations and be less attractive to potential tenants,” noted Cluttons.