The upcoming supply of new buildings in Oman is expected to outpace growth in demand and hurt rental rates in the coming quarters, according to a GCC real-estate report published by Kuwait-based Global Investment House (GIH).
The report said that the office market in Oman remained stable in the third quarter of 2012 compared with the same period last year.
Oman's real-estate sector was buoyed by a strong economy in 2012. However, the upcoming supply of buildings is expected to outpace the growth in demand, thereby leading to oversupply in the market. This, in turn, is expected to hurt rental rates in the coming quarters, the report said.
GIH said that building quality and design, rental incentives, and parking space are becoming important for attracting tenants in Oman's office market.
Furthermore, supply of lower-grade buildings is expected to increase in the near future, especially in subprime locations, thus posing a concern for the already-declining rental rates in such areas. Nonetheless, demand remained strong for small, fully furnished 50-250sq m office spaces in prime locations, the report added.
According to the report, the average monthly office rentals in Shatti al Qurm have come down to RO8 per sq m in the third quarter of this year from RO10 per sq m in 2011. The average monthly rentals in Al Khuwayr stood at RO6 per sq m, while in Azaiba and Ghubra it stood at RO7 per sq m.
The GIH report said that the sultanate's warehousing market has seen a rise in demand due to the expanding industrial sector in the country.
However, the property supply has remained constrained, resulting in higher rentals for warehousing properties. Real-estate development activity remained strong in Barka, Duqm, and Salalah during the third quarter of 2012.
Although Oman’s real estate market remained buoyant this year, the residential rental market suffered from an undersupply of quality stock that suited tenant requirements, the report said.
Demand for premium-location rental properties with facilities such as gyms, swimming pools, and gardens remained strong, it added.