Oman’s real estate market seen in significantly improved position
MUSCAT: Oman is in a significantly improved position in comparison to this time last year, but headwinds remain for the real estate sector, according to a new report.
“Landlords will need to be flexible, proactive and move quickly to changing market conditions in order to attract and retain tenants,” Ihsan Kharouf, Head of Savills Oman, said.
Savills, the leading global real estate advisors, had released its latest report analysing the current state of Oman’s real estate market on Monday.
“Opportunities for successful development will need to be wellconsidered and focussed on evident market gaps, opportunities and needs,” Kharouf said.
Twelve months after the pandemic, 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 Savills report added.
IMF predictions
According to government figures, gross domestic product (GDP) (at current prices) dropped by just over 15 per cent in 2020 in comparison to 2019. The International Monetary Fund (IMF) and World Bank are both projecting that Oman’s economy will show a moderate recovery over 2021 before seeing a notable acceleration in 2022. The IMF’s current projections are then for steady but more limited growth from 2023 to 2026.
Oman’s economy is also driven to a significant degree by government spending while, according to the IMF, government revenues dropped by 24 per cent from OMR11 billion in 2019 to OMR8.3 billion in 2020.
Encouragingly, the IMF is predicting that government revenues will recover at 15 per cent annually over the next two years to OMR9.6 billion in 2021 and OMR11 billion in 2022 before
stabilising at a growth rate of one per cent to 3 per cent per annum from 2023 to 2026. At these revenue levels, the IMF is projecting that the government will be able to maintain spending at just under OMR12 billion annually over the next five years.
Macroeconomic and demographic trends
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 stabilise over recent months.
Office market trends
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 square metres of office space under construction, while requirements over 2,000 square metres are extremely rare.