The retail mall space in Oman, especially in the capital Muscat, will witness big growth in 2012 amid continued demand from the food and beverage sector, according to real estate specialist Cluttons.

Cluttons in its 2012 outlook said the demand will remain strong for established shopping malls with proven footfalls but that some of the newer retail malls will continue to perform below expectations and be less attractive to potential tenants.

The smaller retail space will be in much demand, in particular from the food and beverage sector - where potential retail tenants are searching for space within successful shopping destinations - attracted by proven footfall and/or in prominent locations with ample car parking provision, the expert said in its report.

'Muscat has approximately 300,000 sq m of retail space in purpose-built retail centres. This figure does not include a large number of ground floor retail units and showrooms in mixed-use buildings as predominant in areas such as Ruwi, Ghubrah North and Al Khuwair,' Cluttons said.

Over the next 18 months, developments under construction will deliver an additional 100,000 sq m of good-quality, retail mall space, said the report.

However, Muscat City Centre will continue to dominate the retail mall sector in terms of footfall and rental values, it added.

Commenting on the commercial sector, Cluttons said that rental values for office space will continue to soften as new office space enters the market.

'The vast majority of office stock in Muscat is Grade B or C with a limited availability of Grade A space. This will change over the coming year as a number of large scale, Grade A office developments are due for completion in the near future,' it stated.

Four recently or soon to be completed developments alone will add approximately 158,000 sq m of Grade A office space to the market.

According to Cluttons, the demand for office space in the capital area will remain relatively steady over the next 12 months.

The majority of demand will remain, however, on smaller spaces of up to 500 sq m: flexibility in office space design to cater for smaller space occupiers will be vital.

Suitable car parking facilities will remain a key feature in attracting office space tenants, said the specialist in its report.

While there is strong interest in Grade A office space, many tenants will continue to be unwilling to pay a significant premium in comparison to the rental values for Grade B space in the same area.

'It is evident that the supply of office space in the Muscat capital area will accelerate significantly over the coming year. In an increasingly competitive market, landlords will need to adopt pro-active leasing strategies in order to secure tenants,' Cluttons said.

Methods that Cluttons expects to see increasingly used, include initial rent-free periods or stepped rents over the term of the lease. High quality, professional property management will be vital in attracting and retaining tenants.

On the industrial and logistics sector, the expert said, 'It will witness continuous growth with the ongoing development of shipping ports, free-trade and industrial zones in Salalah and Sohar.

'With greater certainty on the development of the new industrial city at Duqm, increased clarity from the government as to plans for the development of the industrial and logistics sectors, and continued investment in transport and power infrastructure will help to drive forward the development of the industrial and logistics sector.

'Demand will be strong and rental rates steady for warehousing in the Muscat and Batinah areas, as supply of warehousing in the rental market remains constrained,' said Cluttons.

'There will be an increasing demand for bespoke, international quality warehousing facilities as more companies are drawn the Sultanate, seeking modern and efficient facilities,' it added.-TradeArabia News Service