Muscat office market beset by oversupply

MUSCAT : The commercial real estate landscape in Muscat Governorate has undergone significant developments recently. As of 2023, the market faces unique challenges, particularly concerning the supply and demand dynamics in the office space sector.

According to Swapnil Pillai, Associate Director Research Middle East, Savills, "The regional economies, including Oman, in 2024 are likely to experience a modest slowdown compared to initial expectations but are still projected to outpace 2023 growth."

Muscat has seen a steady supply of new office developments, but the pace of these introductions has slowed down. This has resulted in an oversupply situation. Most of the new supply consists of lower-grade office spaces, limiting the type of occupiers interested in leasing space in such developments.

The demand for office space in Muscat remains moderate, with a particular focus on smaller office spaces. Larger office spaces are experiencing relatively limited demand. Existing demand primarily comes from entities with established presences in Muscat, many of which are considering relocation.

One crucial factor impacting the demand for office spaces in Muscat is the availability of parking space. Given the reliance on private cars for commuting, the availability of adequate parking facilities is a critical consideration. However, the ratio of car parks to usable office space remains low across Muscat.

There is a growing interest from companies looking to relocate to the Airport Heights area in Muscat. The suburb’s good transport connectivity and its close proximity to the Seeb conurbation make it an attractive option for businesses seeking convenient access to their workforce, said Pillai.

In line with global trends, Muscat has witnessed a significant expansion of serviced office facilities over the last decade. Despite the increasing supply, the demand for these serviced office spaces has kept pace, resulting in generally good uptake and occupancy levels. Rental values have remained relatively stable, and in some cases, they have even increased over the past few years.

As of 2023, Muscat's office market faces the challenge of oversupply, primarily in lower-grade office spaces. Demand is focused on smaller, more cost-effective options, and the availability of parking space remains a key factor in demand. The rise of the Airport Heights area is an interesting trend to watch, offering a convenient location for businesses, Pillai adds.