The residential rental market continued to be under pressure during Q1 2016 as companies are trying to adjust to the market conditions and minimise expenses by reducing headcount and housing allowances, according to leading consultancy house PKF.

Based on third-party reports, due to the slowing economic growth, demand for rented accommodation and particularly larger housing units has decreased, resulting in a 12.7 per cent y-o-y (year-on-year) decline in average residential rents during the first quarter, it stated.

Over the last couple of years, a large supply of new quality apartments has penetrated the residential market in Muscat, which, however, was absorbed quickly due to a sustained growth in the expat population and increasing demand for smaller-sized units.

As a result, vacancy rates across the villa segment increased, leading to a 14.1 per cent y-o-y decline in average monthly villa lease rates, said PKF.

With regards to the residential sales market in Oman, the prevailing regional economic uncertainty and the decline in disposable household income levels have resulted in vendors decreasing property sales rates to entice demand from potential buyers.

As a result, the number of sales contracts during Q1 increased slightly by 0.3 per cent to 20,963, when compared to the same quarter in 2015 according to the National Centre for Statistics and Information, it added.

Despite the increase in transactional activity, the total traded value of property in the sultanate amounted to RO922.1 million ($2.38 billion) in Q1, representing a y-o-y decline of 30.3 per cent. The quarter also witnessed a 39.5 per cent fall in the number of properties issued for GCC nationals.

Oman's integrated tourism complexes (ITC) and more specifically Al Mouj and Muscat Hills continued to register high occupancy rates, as ITC developments remain the only places in the country where non-GCC nationals are permitted to own a property.

The first quarter of the year witnessed the launch of 'The Boulevard' project in Muscat Hills "a pedestrian-only 665-m-long street that boasts shopping, dining and leisure outlets, which is due for completion in 2018," stated the consultancy house.

Along with the handover of Muscat Hills Phase Two villas and a number of additional upcoming projects, including the much-anticipated Intercontinental Hotel, it is expected that the master development will reinforce its attractiveness among residents and visitors and continue to command high sales rates, it added.

On the retail sector, PKF said the demand for retail space across the shopping malls in Oman remained robust during Q1 2016, supported by the increase in the country's population, which at the end of March 2016 totalled 4,397,790 (5.8 per cent y-o-y growth).

The growing consumer awareness as well as the increasing demand for international brands and improved shopping environment has prompted developers to invest in expanding Oman's retail sector, which currently has the lowest retail GLA (gross leasable area) per capita within the GCC region, standing at 0.09 per sq m.

The first quarter of the year witnessed the official inauguration of Panorama Mall in Muscat, which added approximately 21,000 sq m of GLA to Oman's total retail space stock.

The shopping centre is spread across three levels and houses close to 116 retail outlets. As of mid-February, 75 per cent of the retail space in the mall has been leased, while only half of the outlets have opened.

As far as new project announcements are concerned, Majid Al Futtaim revealed a new RO5-million ($13 million) expansion plan for City Centre Qurum, which will see the addition of approximately 3,150 sq m of leasable area and bring the total GLA of the mall up to 26,500 sq m. The project is slated for completion by the end of this year.

With regards to the upcoming retail supply in Oman, a number of new shopping centres are expected to open across the country including the 137,000 sq m Mall of Oman, which will house 350 new outlets and the country's first snow park (completion date: 2020), the 40,000 sq m City Centre Sohar as well as the 16,000 sq m My City Centre Sur to be completed by 2018 and 2017 respectively.

Furthermore, the addition of 105,000 sq m of retail space at the Palm Mall in Al Khoudh and the 30,000-sq-m expansion of Muscat Grand Mall, both of which are slated for completion within the next 18 months, are expected to give a further impetus to the retail market in Oman.

The rapid growth of the sector, however, may also result in a potential supply-demand imbalance, leading to an increasingly competitive market and increase vacancy rates across prime mall locations.

Currently, demand indicators outstrip supply growth, resulting in stable occupancy rates across prime shopping malls.-TradeArabia News Service