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Muscat - Opportunities exist for landlords to secure income by offering prospective tenants additional incentives, according to international real estate consultancy, Cluttons.
Cluttons' Muscat Spring 2016 Property Market Outlook report asserts that landlords who are putting tenants first by offering realistic market rents in line with the current economic reality and increasing incentives such as free access to onsite and local facilities, will likely be the first to benefit once the market does pick up.
Philip Paul, Cluttons' Head of Country, Oman said: "We continue to see increased vacancy levels in stock that is perceived to be secondary, presenting landlords with a significant opportunity to take a long term view and refurbish during these emerging void period. With average rents slipping across Muscat, tenants are now benefitting from choice although Cluttons advises that good quality property correctly priced is still being snapped up quickly.are Tenants are focused on good quality accommodation, with well managed facilities and amenities. With that in mind, upgrading stock is certainly advantageous for landlords at this time."
According to Cluttons' research, average residential rents dipped by 5.9% during the first quarter, leaving them 12.7% below Q1 2015. The decline was led by the villa market, leaving average monthly villa rents at just over OMR 1,004, 14.1% lower than Q1 2015. wide ranging redundancy programmes in key sectors, with the oil and gas sector still shrinking, are having a direct impact on rental levels.
Faisal Durrani, Head of Research at Cluttons said: "If the expected bottoming out of the market does not in fact materialise, then demand for rental accommodation will continue to decline over the next six to twelve months, putting further downward pressure on rents, particularly as core sectors such as oil and gas, continue to show signs of shrinking. With this in mind, it is our expectation that rents during 2016 are likely to fall by a further 5% to 10%, on average, across Muscat. However, it is worth highlighting that better quality properties priced at the lower end of the budget spectrum, at between OMR 250 per month and OMR 500 per month, are likely to remain stable."
Paul added, "In the sales market, we have recorded price declines across the board, with buyers now watching for affordable options as the market comes in line with the new market reality.
Cluttons research shows that during the first quarter of 2016, transactional volumes across the Sultanate were slightly lower than the same period in 2015, according to the National Centre for Statistics and Information (NCSI). The figures show that the traded value of property in this period decreased from OMR 1.322 billion in Q1 2015 to 0.922 billion in Q1 2016.
Paul commented: "This decline reflects the squeeze on disposable household incomes across the region as the era of low oil prices beds in. Going forward, we expect this trend to persist, particularly as oil prices appear unlikely to stage a comeback in the near term. With the region's governments rushing to diversify income streams through the introduction of new fees and taxes and the dismantling of energy subsidies, household incomes in the GCC are expected to come under further pressure, with disposable incomes also likely to fall and Oman has not been immune to this."
Commercial Market
According to Cluttons, rents across most of Muscat's main office markets have remained steady for the ninth consecutive quarter despite strong headwinds to economic growth. The only submarket that has shown movement in rents in the past 12 months is Shatti Al Qurum, where office rents have risen by 6% to OMR 8.50 psm.
Durrani said, "We are aware of instances where landlords have used the recent increase in the lease registration fee from 3% to 5% as a way to support asking rents in the first year of tenancies; however going forward we expect to see significant concessions made in order to attract and more importantly, retain existing tenants. With this in mind, it is our view that average monthly rents, which roughly hover between OMR 4 and OMR 9 psm per month, are likely to decline by OMR 1 psm to OMR 2 psm across the board over the course of the year as the market adjusts to the challenging economic environment.
"Well managed buildings may buck the trend, with rents likely to remain stable in popular schemes and we must of course remember that rents are already at a historic low and exceptionally competitive compared to other locations in the Gulf, so the declines will be likely very minimal".
The report also highlights that in the retail market, after limited growth between 2005 and 2012, recent years have seen the introduction of a significant amount of new retail mall space in Muscat which has increased the supply of leasable space by approximately 75% over the last three years alone. The most notable malls introduced in this period are Muscat Grand Mall, Avenues Mall and Panorama Mall which are all located in Bausher. Despite the marked increase in retail mall space, occupancy levels have remained relatively stable at around 85 to 90%.
"It is clear that the retail mall sector in Muscat is going through a period of rapid expansion and we expect that the significant growth will translate into an increasingly competitive market. For retail mall owners, we expect the strengthening supply pipeline will prompt the need to carefully consider market positioning, tenant mix and rental values in order to maintain good occupancy levels," Paul concluded.
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About Cluttons
Cluttons is a global real estate services company, with a presence in over 50 countries. Cluttons was on one of the first surveying and property advisory businesses to open offices in the Middle East, and now offers dedicated real estate services across the Arabian Gulf, with offices in Abu Dhabi, Dubai, Sharjah, Bahrain and Oman.
Cluttons provides clients with residential sales and letting services, commercial leasing and investment, consultancy, property and facilities management, and valuations, fulfilling their property needs across the Middle East. Cluttons delivers its high-quality real estate services to clients ranging from international corporates and institutional investors, to private individuals and families.
With a strong presence in the Middle East since 1976, Cluttons is a trusted market leader in the region, having grown its operations and established a proven track record of success over the last 40 years.
Founded in 1765, Cluttons employs over 700 staff worldwide and has a fast-growing international presence, including a network of offices in the UK, Europe, Middle East, Asia Pacific, India and Africa
© Press Release 2016