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Build-to-Suit Commercial Development on the Rise in Oman

18-Oct-2015


According to Cluttons, a rise in build-to-suit developments in Oman is predicted as occupiers seek a tailor made approach to commercial developments.

Cluttons believes build-to-suit lease transactions will have an increasing appeal to both developers and occupiers in the Sultanate, particularly as the logistics and industrial sectors continue to expand and mature. The process allows tenants get premises built to their specific business requirements in return for agreeing to a long term lease before construction starts while allowing the landlord to make a secure return on the development costs.

Commenting on the build-to-suit opportunity, Matthew Wright, head of consultancy and industrial at Cluttons Oman said, "Our six years' experience in the warehouse and logistics sector in Oman indicates that there is an underlying interest in build-to-suit opportunities, which present considerable advantages for both landlords and tenants. It will, however, take time for the process to be fully understood and accepted by the market."

In the first half of this year, Cluttons' Muscat commercial market report singled out the warehouse sector as being a stand out performer in the commercial market with improved infrastructure and connectivity driving demand from occupiers and catalyzing the development of modern warehouse estates. The report revealed that the country's various transport infrastructure investments and upgrades are playing an important role in boosting connectivity across the country, which is subsequently improving Oman's attractiveness as a regional logistics and distribution centre.

As the logistics market grows, Cluttons predicts that occupiers' needs for modern warehousing to allow the creation of integrated and efficient supply chains will generate requirements for new premises built to the occupant's specific needs in an economically efficient manner.

Wright added, "The main driving force for the development of build-to-suit facilities will be the understanding from the commercial market that it is a financially efficient development option from both a developer and occupier perspective."

According to Cluttons, build-to-suit represents a secure investment for developers and external funding should be easily sourced since a long term tenant and income stream will be in place before construction begins. For the tenant, build-to-suit provides the opportunity to acquire premises built to its exact requirements while allowing it to preserve and re-invest capital in its business operations rather than tying it up in real estate. The build-to-suit model can be applied to many different types of real estate but is a method of development most commonly applied in the commercial warehouse and industrial sector.

"This is the preferred method for larger warehouse occupiers to acquire suitable warehouse facilities in more mature markets and is becoming increasingly common in markets such as Dubai. In Oman, build-to-suit is a new and relatively untested form of development with only two large warehouses developed for major retailers on a build-to-suit basis in the Muscat area. We are, however, seeing developers starting to offer build-to-suit opportunities, an example being the new First Logistic Services warehouse development in Rumais", Wright concluded.


World Property Journal
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