The Sultanate is in a significantly improved position in comparison to this time last year, but headwinds remain for the real estate sector, leading real estate advisors Savills said in its latest report on Oman’s real estate industry.
According to Ihsan Kharouf, Head of Savills Oman, landlords will need to be flexible, pro-active and move quickly to changing market conditions in order to attract and retain tenants. Opportunities for development will need to be well considered and clearly focussed on evident market gaps, opportunities and needs, he said.
“Twelve months after the pandemic, The Sultanate 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,” Savills stated in its report.
During 2020, an increasing focus on providing jobs for nationals and the impacts of the Covid-19 pandemic saw a significant acceleration of the decline in the expatriate population that started in 2017. There are now around 320,000 (approximately 15 per cent) fewer expatriates in the Sultanate in comparison to 2016 although the expatriate population has started to stabilize over recent months.
According to Savills, 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
“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 the city. There is currently circa 100,000 sqm of office space under construction, while requirements in excess of 2,000 sqm are extremely rare,” it said.
The report also highlights the potential for co-working space in the Sultanate. With the recent rapid evolution of the workplace and the way that Savills works allied to the global success of co-working spaces, the real estate advisors consider that this type of facility would be well suited to the requirements of start-ups and smaller companies in Muscat while offering a different development approach to more traditional office spaces.
The report noted that 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 from 880,000 to 760,000 (almost 15 per cent) over the course of 2020.
“The expatriate population has started to stabilise over recent months but there is the potential for further reductions in numbers due to the long term economic impacts of the pandemic and a growing focus on Omanisation of the workforce, particularly for white collar positions,” said Savills.
Citing the Oman Census 2020, the report noted that there are currently circa 80,000 vacant residential units (around 20 per cent of the total residential supply) in Muscat. 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.
“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,” the report added. (Picture for illustration only)