Residential prices in Muscat are rising at a steady pace, but office space is in short supply. Published in MEED, 22 March 2015
With one of the smaller and more subdued economies of the region, it is little surprise that Muscat also has a rather quiet property market. Demand is growing steadily, but so is supply, meaning that the Omani capital is not seeing the sort of rapid price rises of some other markets in the region.
Rental costs for two- and three-bedroom apartments rose by an average of 2.3 per cent in the 12 months to the end of September 2014, according to real-estate firm Cluttons, with the smaller properties outpacing the larger ones.
The relatively affordable area of Azaiba, saw prices rise faster than average. Prices in Azaiba now range from RO550 ($1,430) a month for a two-bed apartment to RO850 for a three-bed property.
Further up the scale, the most expensive areas include The Wave development, where a typical two-bed apartment costs around RO850 per month and a three-bed apartment will be around RO950. Shatti al-Qurum is not far behind, with prices of around RO800 and RO950 for two- and three- bedroom apartments.
Villa rental prices have been rising at a slightly faster pace than apartments, increasing by 4.8 per cent over the 12 months to the end of September. The market is being led by high demand for three-bedroom villas, which rose in price by 5 per cent over the period. Such properties are concentrated in the integrated tourism complexes (ITCs) such as The Wave and Muscat Hills, where they cost from around RO1,000 to RO1,400 a month.
More developments are on the way. The first phase of the Saraya Bandar Jissah ITC, to the southeast of Muscat, is due to open by 2017 with three residential zones. A further two zones will follow after that and the entire project, with two hotels and 398 residential units, should be complete by 2020. The project is a joint venture by the local Omran and UAE-based Saraya Holdings.
Overall, however, new supply remains limited and as a result Cluttons expects prices to continue growing in the future, with the fastest growth likely to come from high-end properties. While The Wave continues to be sought after, Cluttons predicts that Muscat Hills will grow in popularity once the French curriculum school and other facilities open there.
In the retail market, supply is increasing. Cluttons says some 380,000 square metres of new mall space is expected over the coming two years. Oman is following a region-wide trend for the retail sector to be increasingly dominated by large malls, but traditional high streets also continue to do well. Areas such as Ruwi High Street, Al-Khuwair Commercial Street and Seeb High Street all have retail occupancy levels of close to 100 per cent.
The arrival of some mid-market brands is also giving a boost to the retail sector. Clothing retailers Matalan and Red Tag have become the anchor tenants at the Markaz al-Bahja mall, while R&B and Homes R Us are among the main tenants at Muscat Grand Mall.
Dutch-owned supermarket brand Spar is due to open nine outlets around the country by the end of 2016, following a deal with local conglomerate Khimji Ramdas. The first opened in Al-Khuwair, to the west of Muscat, in January.
The office market in Muscat has been one of the more dynamic over the past year. According to another real-estate firm Savills, there has been a rapid growth in quality office stock ,but that has been outpaced by the growth in demand, leading to falling vacancy rates and sharp rises in prices.
Office vacancy rates in Muscat are now running at just 5 per cent, according to Savills. That is one of the lowest rates in the region and far below the average of 20 per cent. Average rental rates are still relatively low, at $18.20 a square metre.
Only Manama is cheaper in the region, but the rates in Muscat grew by 16.7 per cent over the past year according to Savills. Prime office rents are also growing quickly, although at a slightly slower pace – they were up 12.5 per cent over the past 12 months to reach $23.40 per sq m.
This will come as something of a relief to commercial property developers. Muscat has been suffering from an oversupply of office space since 2010, when vacancy rates were running as high as 30 per cent. However, the relief may just be temporary.
Developers have been keen to tap into the growing demand, and 5,500 sq m of new grade A space is due to come on stream at the Panorama Mall in Al-Khuwair in the first quarter of 2015, along with close to 6,000 sq m of space at the Omnivest Building in the Shatti al-Qurum district. Cluttons says that there is also a high level of activity in the Airport Heights district, which it says is emerging as the city’s new central business district.
Savills says that an additional 152,000 sq m of quality office space is currently in development, which means that the market is likely to once again be suffering from oversupply by 2017 unless demand gathers further momentum.