Mar. 30, 2018
The fall in global oil prices has had an impact on the wider Omani economy, and the construction sector was far from immune. Several major commercial and residential real estate projects slowed or saw new delays due to slower demand and funding difficulties as oil revenues dried up. Still, there is reason for optimism about the larger state of the market; anticipated recoveries in the price of oil should help restore sources of investment to the sector, and the Omani government has been aggressive about spending on new infrastructure projects needed to create a more diversified economy. Perhaps most encouraging are the Sultanate's demographics; Oman's population growth rates in recent years have been among the highest in the world, an indicator that demand will remain strong for years to come.
The Omani housing market has seen downward pressure in recent years due to the fall in oil prices and the resulting labor reductions and diminished spending power. While demand still exists, it has shifted toward smaller and more affordable properties at the expense of the larger luxury projects constructed during the midst of the oil boom. A wave of construction that began while oil prices were near their peak is expected to be completed soon, meaning that more than 1,600 new units will arrive on the market by the end of 2017. In the retail and commercial sector, large-scale projects are at the core of the Omani economy's plans for growth, which has helped construction largely remain strong during the downturn. Major projects like the Oman Avenues Mall have added more than 345,000sqm of retail space to Muscat over the past two years, and an additional 280,000sqm are planned to be completed by 2020.
These projects are part of a larger strategy to make the Sultanate a destination for tourism and high-end retail. The 135,000sqm Mall of Oman, for example, is set to become the largest retail center in Oman upon its completion in 2020. Led by UAE-retail developer Majid Al Futtaim, the mall's attractions are expected to include a snow park, a cineplex, and more than 3,350 outlets, making it an ideal destination near Muscat International Airport. The hospitality industry as a whole has been a major beneficiary of the Omani government's push to attract new MICE activity and tourism as a whole. 2016 saw the arrival of the Oman Convention and Exhibition Center, which is part of a larger urban center project that will include four hotels and additional recreation centers. The number of hotel rooms in Muscat has grown from 2,900 in 2005 to 9,600 in 2016, and additional development underway is expected to add 9,000 rooms to that total by 2021. As such, these projects have been one of the core businesses for the Omani construction industry and should remain so for the foreseeable future while the residential market remains soft.
Perhaps most promising for the construction sector in the medium term are the infrastructure projects needed to meet the government's tourism and industrial growth goals. Muscat has seen a wave of construction designed to boost transportation infrastructure in recent years, the largest of which has been a USD1.8 billion expansion to Muscat International Airport that will increase capacity to 48 million passengers in phases throughout the next two decades. Duqm Airport is also in the midst of a USD94 million construction project that is adding a terminal, and preliminary studies are being conducted at Al Haraf, Bukha, Lima, and Khasab airports. These transportation projects will be a boon to the industry through both their immediate construction and the necessary road, storage, and maintenance work that will be required to complete the surrounding infrastructure.
Moving forward, industry participants expect demand for warehousing and shipping facilities projects to be at the forefront of the construction sector in the near future as Oman seeks to position itself as a logistical hub for the Middle East, Asia, and Africa.