The long-term economic impacts of the COVID-19 pandemic are continuing to challenge the recovery in Oman’s real estate market, according to the leading global real estate advisory firm Savills.
Savills Oman on Monday released its latest report analyzing the current state of Oman’s real estate market. Ihsan Kharouf, head of Savills Oman, highlighted that the sultanate is in a significantly improved position in comparison to this time last year, but headwinds remain for the real estate sector.
“Landlords will need to be flexible, proactive and move quickly to changing market conditions in order to attract and retain tenants. Opportunities for successful development will need to be well considered and clearly focused on evident market gaps, opportunities and needs,” Kharouf said.
The Savills report said that Oman has significantly accelerated its COVID-19 vaccination programme in June with the intention of over 70 per cent of the population being vaccinated by the end of the year.
‘This is likely to be of significant benefit in re-opening the travel and tourism sector while allowing current restrictions on the retail sector to be significantly eased,’ the report said.
The pandemic and subsequent lockdown measures have negatively impacted the office market in Muscat. Office leasing activity was limited before the pandemic and the onset of travel restrictions and lockdown measures led to muted demand levels, Savills noted in the report.
‘Almost all new office leases were observed from companies with an existing presence in Oman. Demand remains primarily focused on smaller, fully finished spaces. In contrast to the demand dynamics, recent years have seen the introduction of a significant supply of new office space which has exceeded the limited demand for office space in Muscat,’ Savills siad.
It noted that there is currently around 100,000sqm of office space under construction, while requirements in excess of 2,000sqm are extremely rare.
Expatriates constitute 40 per cent of Oman’s population and play a significant role in the demand for residential units across the country.
While the Omani population has continued to grow steadily, expatriate numbers started to drop gradually in 2018 and 2019 before seeing a drop of almost 15 per cent over the course of 2020.
‘The expatriate population has started to stabilise over recent months but there is potential for further reductions in numbers due to the long-term economic impacts of the pandemic and a growing focus on Omanisation of workforce, particularly for whitecollar positions,’ Savills said. Oman Census 2020 reveals that there are currently around 80,000 vacant residential units or around 20 per cent of the total residential supply in Muscat, according to the Savills report.
With the vast majority of Omanis being owner-occupiers, it is estimated that a significant proportion of the vacant units are likely to be investment properties for the rental market, the report said.
‘As a result of the notable drop in the number of expatriates in Muscat over 2020 allied to the difficulty for new employees to enter Oman due to travel restrictions, demand has seen a notable reduction over the last 15 months. It has been focused to a notable degree on more affordable apartments and villas/townhouses in the more exclusive localities of Al Mouj, Muscat Hills and Shatti Al Qurum,’ Savills report added.