cluttons.

com

MUSCAT, WINTER 2014

cluttons.com

COMMERCIAL MARKET OUTLOOK

Q3 2014

Q2 2014

Q1 2014

2013

2012

2011

2010

2009

2008

OMR psm

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medium term. This is a trend we expect to persist, particularly as the
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of lower grade schemes yet to complete remains strong and
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During
first three
quarters
of 2014,
average
monthlyadoffice
vacancy levels in this portion of the office market remain high.
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rentsconsect
held steady
at between
OMR 4 and OMR 8 psm in most
submarkets. This does however mask the fact that rents for more
Conversely, Grade A supply levels in Central Muscat are currently
secondary and tertiary space are still experiencing gradual declines,
limited to a handful of schemes such as Al Assalah Towers, Beach
while Grade A rents in desirable schemes are holding steady. The
One and Al Rawaq, where reported occupancy levels range from
persistent demand from larger corporate occupiers and smaller SMEs
75% to 90%.
for these top tier schemes, allied with the limited supply pipeline,
is expected to sustain the upward pressure on rents in the near to
Grade A office pipeline remains limited
The strong demand for higher quality schemes has encouraged a
Performance of monthly office rents by submarket
number of developers to step into the market. In particular, there
16.00
is heightened development activity in the Airport Heights area,
15.00
14.00
which is quickly emerging as the capitals new CBD, away from
13.00
Old Muscat. The movement of banks westward continues with the
12.00
11.00
National Bank of Oman and the Bank of Sohar for instance, both
10.00
building new headquarters in the west of the city. It is still unclear
9.00
what proportion, if any, of these new HQ buildings will be let on
8.00
7.00
the open market, but any space made available is expected to be
6.00
rapidly absorbed due to the high demand for Grade A space.
5.00
Cluttons
LLP
4.00
3.00
Elsewhere, the only other substantial amount of Grade A space
2 Portman
Street
waiting in the wings is at the new Panorama Mall in Al Khuwair,
Portman House
which will include 5,500 sqm of prime office space, spread across
London W1H 6DU
CBD
Qurum
Al Khuwair
six levels; it is expected to complete in Q1 2015. In addition to
Shatti Al Qurum
Ghubrah
Azaiba
this, the Omnivest Building in Shatti Al Qurm is set to deliver
T: 020 7647
7033
Source:
5,954 sqm of Grade A office space to the market imminently.
F: 020Cluttons
7647 7033
cluttons.com

Cluttons
Muscat Commercial Market Outlook Winter 2014

Another value retailer that has experienced rapid growth is

Centrepoint of the Landmark Group. In addition to Al Khuwair,
Centrepoint has developed further retail stores in Ruwi, Muscat
City Centre, Sohar and Salalah. A new Centrepoint outlet will also
open at the Barka Mall that is currently under construction, while
its existing store in Al Khuwair is being expanded.
Hypermarket chains expanding
While mall operators may be reconfiguring their retail offering,
the hypermarket sector has continued to create and capture
further market share and remains central to the retail mix at
most major shopping malls. Lulu Hypermarket and Carrefour, for
instance, both of which have a high market penetration across the
Sultanate, are set to be joined by SPAR, the Dutch supermarket
chain, which signed a deal with Kimji Ramdas in 2013 to
introduce nine supermarkets into Oman by 2016.
In the face of the rising demand, the forecast of some 380,000
sqm of mall space that is expected over the next two years may
to an extent temper rental growth potential.
High street retail still buoyant
Despite the surge in mall retail space, high street retail has
continued to remain popular, especially in densely populated parts
of Muscat, with Ruwi High Street, Al Khuwair Commercial Street,
Seeb High Street and Al Khoud High Street all operating at near
100% occupancy. The focus of these streets is generally on local
and value outlets rather than international brands. They are aimed
at the requirements and spending power of the general population
rather than being more aspirational as is generally the case with
the larger malls. The strength of demand for units is reflected in
the fact that rents are generally equivalent to those achieved by
top tier malls.

Typical monthly high street rents

25
20

OMR psm

Retail sector activity continues to intensify

The focus on attracting value brands to Muscats shopping malls
persists and this is an emerging strategy for most mall operators.
At Markaz Al Bahja for example, there has been a notable rise in
footfall, rental values and occupancy following the introduction
of Matalan and Red Tag as the shopping centres two main anchor
outlets. Red Tag, which is a fashion and home furnishing brand, has
moved quickly to capitalise on the demand for mid-range brands
and has expanded to six outlets across Oman. Another example
of the focus on the value sector has been at Muscat Grand Mall
where R&B, a value fashion outlet, and Homes R Us, a midrange home furnishing outlet from the Apparel Group, have been
positioned as the malls two main anchors.

15
10
5
0
Up to 75 sqm

75 sqm to 200 sqm

Lower limit

Upper limit

Source: Cluttons

Port closure to drive industrial sector growth

As expected, the closure of Port Sultan Qaboos (PSQ) at the end
of the summer has acted as the catalyst for enhanced industrial
development in Sohar. Aside from the OMR 50 million port
expansion now underway at Sohar Port, the adjoining freezone
also continues to grow, with approximately 80% of the 500
hectare first phase now allocated. The rapid take up has prompted
the authorities to bring forward the second phase expansion
by three years and development on phase two is expected to
commence by the end of 2014. The Saud Bahwan Group and
the Suhail Bahwan Group have been amongst the most active
occupiers. Both have set up separate automotive logistics facilities
which are together projected to result in the movement of
200,000 vehicles through the freezone annually.
Warehouse rents hold steady
Despite the reconfiguration of industrial estates around the
capital as occupiers relocate and reposition themselves after the
closure of PSQ, rents have remained unchanged through the first
three quarters of 2014. Monthly warehouse rents have held steady
at between OMR 2 and OMR 4 psm across all major areas. With
strong occupier demand unlikely to ebb in the near term, rents are
likely to begin drifting upwards early next year once Sohar Ports
freezone becomes saturated and occupiers are forced to seek out
space in a supply constrained market.
Integrated northern coastal hub emerging
Elsewhere, the government has announced plans to commence
development of the 90 million sqm South Al Batinah Logistics Hub by
the end of the year. The hub which is strategically located to the South
of Barka, with direct access to planned road and rail developments,
is expected to compliment Sohar Port, while bolstering the industrial
and logistics capabilities of northern Oman tremendously. This is in
turn expected to boost the appeal of the northern coast among larger
regional occupiers and logistics operators.

For further information, please contact

Matthew Wright
Steve Morgan
Head of consultancy & industrial
CEO of Middle East
matthew.wright@cluttons.com
steven.morgan@cluttons.com
+968 2205 7917
+9714 365 7700
Philip Paul
Head of Oman
philip.paul@cluttons.com
+968 2205 7900

Greater than 200 sqm

Faisal Durrani
International research & business development manager
faisal.durrani@cluttons.com
+44 207 647 7166

Cluttons & Partners LLC 2014. This publication

is the sole property of Cluttons & Partners
LLC and must not be copied, reproduced or
transmitted in any form or by any means,
either in whole or in part, without the prior
written consent of Cluttons LLP. The information
contained in this publication has been obtained
from sources generally regarded to be reliable.
However, no representation is made or
warranty given, in repect of the accuracy of this
information. We would like to be informed of any
inaccuracies so that we may correct them.

cluttons.com

2014

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steven.morgan@cluttons.com
+9714 365 7700

matthew.wright@cluttons.com
+968 2205 7917

philip.paul@cluttons.com
+968 2205 7900

faisal.durrani@cluttons.com
+44 207 647 7166

.. .2014
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