(MENAFN- Muscat Daily) Muscat- Residential rentals in Muscat, often regarded as an indicator of business sentiments, might see some slowdown in decline as initial signs of a bottoming out have begun to appear, according to international real estate consultants Cluttons.
According to Faisal Durrani, head of research at Cluttons, 'for the last many months, we have been reporting big corrections taking place in the market, and to an extent, there are some initial signs to suggest that in some locations both residential and commercial sectors may be starting to bottom out. It is too early to fully call it but there are signs indicating that.'
The Cluttons Muscat Spring 2017 Property Market Outlook report which was released on Sunday says, subdued economic activity across the sultanate has also led to increased opportunity for tenants in the office market, as declining rental rates has led to office consolidation and migration to more affordable stock.
The report shows that during 2016, average residential rents across Muscat receded by 10.1 per cent, in line with its forecast. During the final quarter of last year, rents declined by 4.2 per cent, leaving average monthly rents just below of RO700.
Durrani said, the year 2017 has begun on a more stable start, with rents during the three months to the end of March declining, on average, by a marginal 0.6 per cent, suggesting some locations may be starting to show signs of bottoming out.
He said 'We track 12 locations in Muscat, four of them have no change this quarter. However People are still nervous about job security, tenants are still shopping around for what they perceived as the best deal for them. We are seeing some changes in the behaviour of landlords, you still got some landlords who are stubborn, to react to market conditions. We are aware of some cases, where the vacancy rate in the building is as high as 25 per cent.'
Philip Paul, head of Cluttons Oman said weaker market conditions have continued to undermine office rents across Muscat.
The reports show that the Central Business District (CBD) witnessed an 18.8 per cent decline in office rents, followed by Ghubrah and Athaiba at 17.9 per cent. These locations emerged as weakest performers in 2016.
Paul said, 'Across the board, rents currently sit at fresh historic lows and are roughly 60 per cent down on the market peak of 2008.'
The report predicts that the short-term prospects for the office market are certainly weak, with rent corrections on average of 10-15 per cent likely this year. With added complications forecasted through the introduction of the GCC-wide five per cent value-added-tax (VAT), demand for office space could be further dampened due to increased operating costs, however, this is still too early to assess.
Hospitality market
The report highlights the continued success of the Omani hospitality sector, as a defiant beacon of success during struggling market conditions across the GCC.
With the expected completion of the landmark US$1.8bn new international airport in Muscat by the end of this year is expected to spur development activity on the airport fringes, whilst also lifting overall economic sentiment.
Sentiment plays a paramount role in markets such as Oman, which is often underestimated. The new airport sends out a strong message about Muscat being open to tourists with rejuvenated and enhanced facilities.
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