The region’s haven of extravagant malls, exclusive shops and designer boutiques has earned it the reputation as a shoppers’ paradise. But with eight ‘mega malls’ now open in Dubai, attention is starting to shift to Abu Dhabi. Cityscape magazine takes a look at how this sector is shaping up for 2011.
The first shopping mall in Dubai ‘Al Ghurair’ opened its doors 30 years ago and effectively opened the flood gates for the emirate’s booming retail sector. Since 1981, the shopping scene, much like the rest of the region, has come on in leaps and bounds. With eight ‘mega-malls’ now in operation in Dubai and each with increasingly innovative attractions to lure in shoppers, such as aquariums and extreme sports like ski-ing and in-door ski-diving, people may be right to jump to the conclusion this emirate is saturated. And while there aren’t any immediate plans to open more malls in Dubai – The Arabia Mall is on hold – the interest for building more malls remains strong elsewhere in the UAE.
Experts at Cushman&Wakefield say Dubai is now on a par with the likes of London, New York and Paris in terms of luxury high street, as designers ‘scramble to open outlets at the Fashion Dome’ (Mall of the Emirates) and Fashion Avenue (Dubai Mall). The consultants say that UAE retail revenue continues to ‘register growth despite the economic slowdown across the globe.’
Based on a study by Business Monitor International, the UAE ranked first in the retail business environment league table for the MENA region in 2010. With its strong wealth and high consumer spending the UAE outperforms its regional peers. The reports states that the UAE’s retail sales have grown to over $107 billion in 2009 from $104 billion in 2008 and are expected to climb to over $120 billion by the end of 2011.
Research carried out by Cushman & Wakefield revealed the annual footfall in major regional malls remains strong, however the malls in Dubai continue to attract a significantly higher volume of visitors (37million) than their Abu Dhabi competitors (14.4million) according to www.thedubaimall.com as quoted in Cushman & Wakefield’s report.
Dubai is the most established retail location in the UAE and remains the most advanced in terms of product. The Emirate has witnessed one of the fastest growths in terms of retail supply, with its gross letable area (GLA) per 1,000 currently at 1,385 sq m.
Looking ahead to future development, experts at Cushman&Wakefield point out that many of Dubai’s planned projects have been delayed significantly or put on hold, however the city’s stock of destination malls has increased recently with the opening of the 130,000 sq m Mirdiff City Centre in March 2010. And unless the $5bn City of Arabia project - being developed by the Ilyas and Mustafa Galadari Group - goes ahead which is to include the 371,512 sq m Mall of Arabia (Phase 1) - MCC is likely to be the last of its kind in Dubai, at least for the foreseeable future.
Total supply in Dubai currently stands at approximately 2,385,157 sq m (25,673,830 sq ft) with no significant additions to stock being recorded in the immediate term.
The Cushman & Wakefield report states: “For most retailers, expansion plans are either being revised downwards or cancelled altogether."
“Despite strong tourism and a projected rise in consumer spending, there has been an increase in mall vacancies, particularly in tier two locations that do not attract the same footfall as the ‘mega malls’. Dubai’s supermalls have attracted the world’s most prominent brands in luxury retail. These upscale shops have been catering to affluent shoppers, mostly wealthy tourists."
“However a change in market conditions, coupled with a global economic crisis that stifled spending habits, is anticipated to initiate a transition that will lead mall owners to focus more on attracting domestic consumers."
“The tourism sector remains a significant component of retail spending in Dubai, but the future health of the local retail market will be primarily driven by the speed with which retail spending increases across the local and expatriate population.”
Oversupply
In Colliers’ International MENA Retail Overview report for Q3 2010, experts predict Dubai’s shopping mall space is set to increase by approximately 30% between 2010 and 2013 leading to an oversupply of over 1 million m² of GLA in 2013. According to the consultants, while the Dubai retail sector does benefit from strong tourist demand, the fallout from the global financial crisis is “likely to have a dampening effect on this external demand.”
The consultants also warn that unless developers and retailers become more closely aligned to the market forces influencing the purchasing power of their end consumers, they run the risk of unsustainable asset performance. “The discretionary spending habits of consumers are shifting and we are seeing retailers purge their brand portfolios in line with this,” explains Stuart Gissing, regional director of Colliers International. “They are downsizing their underperforming products and being more selective about where they place their new brands. Retailers today are more concerned about ensuring that each brand is perfectly matched to their mall location and are questioning issues such as market positioning, shopper profile, store location, footfall and centre management.”
According to Colliers International, this portfolio cleansing and drive towards selectiveness on the part of retailers will start to impact overall mall performance for those landlords that continue to lease retail space on the basis of occupancy alone. Better communication between mall owners and retailers will ensure product mixes are realigned to the new economic reality.
The report, providing comparative key performance indicators across nine cities as well as a retailer sentiment survey, suggests a need for greater product parity between shopping centres and their retailers if developments are to remain sustainable long term investments. “The challenge ahead now is how new, or even strong existing developments align themselves to the commitments retailers have to their consumers,” says Gissing. “Currently we have a cat and mouse situation with some landlords offering perceived relief positions by tweaking their mixes or lease terms to attract new product. This is a very short term tactic. With retailers more attuned to their customers’ wants than ever before, there is a clear need for greater parity between the two.” Gissing adds that this project selection and product alignment should be viewed as a sign of market maturity in the retail sector. “A greater emphasis on developing shopping environments together with the input of retailers should become more commonplace when defining specific positioning statements for new or existing developments,” he says.
For Colliers International, the more successful and established retail developments will maintain their prime status while the gap between prime and second tier locations will continue to widen. In the small to medium mall segment, development collaboration will be key as landlords look to, and should, reposition themselves to match the market. This is likely to mean a shift towards more targeted developments such as replicated community or neighbourhood outlets.
Shift to Abu Dhabi
According to Matthew Jay, a senior retail analyst at CB Richard Ellis Middle East, Dubai has re-bounded well but he says focus for new retail projects has shifted to the capital. “Despite the widely-reported problems of the past 18 months there is now far more positive news from the emirate of Dubai, which appears to have seen off the worst of the recession. In addition, neighbour Abu Dhabi has emerged as the main focus for many developers and retailers in the United Arab Emirates (UAE).”
Mr Jay explains: “Retailers already well established in Dubai are looking to expand into the wider area, as Dubai is saturated in terms of shopping malls, with no short-term plans to open a significant retail space. These retailers have used Dubai as a base to open up their flagship property and will now look to other markets in the region.”
Mr Jay points out that despite the increasing interest in Abu Dhabi, Dubai still captures most of the headlines. “When the landmark Dubai Mall shopping centre opened in November 2008, it was far from full, but since the spring, leasing has picked up and a number of new stores have opened. As a result of this and other mega-mall openings in Dubai over the past five years, smaller and older centres have been feeling the impact on footfall. This situation has been intensified by the introduction of a major luxury area at the Mall of Emirates.
“Fashion Dome has attracted an impressive new line-up of high-fashion brands including Christian Louboutin, Cartier, Paul Smith, Galliano, Versace, See by Chloe, Diane von Furstenburg and the largest D&G boutique in the region. Some of the mall’s existing brands, such as Louis Vuitton, Christian Dior and Gucci, have expanded into bigger units within the Fashion Dome.” As a result, the reports states that malls well known for their luxury brands such as Deira City Centre and Burjuman have had to re-evaluate their positioning. Mr Jay concludes: “In 2011 we are likely to see these and some other malls adjust their offer to find a new niche in a changing retail scene.”
Experts at CBRE agree that Dubai seems to have reached saturation point in terms of new schemes and those shopping centres scheduled to open over the next few years tend to be focused on Abu Dhabi. In October 2010 the first of these, the 200,000 sq m Dalma Mall opened and CBRE calculates that there is approximately one million sq m of retail floor space due to come on line in the next three years.
Projects include Yas Island, Reem Mall, 9712 Mall, Bawabat Al Sharq Mall, Emporium, Mushrif Mall, Deerfields Town Square, Mazyad Mall and Arzanah Project. There is also the proposed opening of the 30,000 sq m Fujairah City Centre, located in the emirate of Fujairah, as well as a mall extension for Al Ain Mall in Al Ain, Abu Dhabi, both of which are scheduled for completion during 2011.
The report concludes that the retail scene “continues to be dominated by shopping centres, largely because of the extremely hot climate, which makes air conditioning essential.” Retail parks are therefore “unsuitable” and according to CBRE ‘big box’ retail also remains fairly immature, although IKEA is to open a ‘big box’ unit at Yas Island in Abu Dhabi in 2011.
The Abu Dhabi Pipeline
According to Cushman & Wakefield, Abu Dhabi’s retail market is currently experiencing a shortage in terms of recreational mega malls compared with Dubai, however the tides could be turning. The capital’s current shopping centre stock is approximately 908,594 sq m and is mainly located in early generation shopping centres such as Marina Mall, Abu Dhabi Mall and Al Wahda Mall.
The average occupancy rates of malls in Abu Dhabi stands at approximately 90 per cent and those offering leisure and entertainment provisions are generally fully let to point that “retailers can struggle to find suitable space in the captial.” The Urban Planning Council’s (UPC) Plan Abu Dhabi 2030, forecasts strategic distribution of retail space across the extended city of Abu Dhabi, with the existing downtown, Al Reem Island, Capital District, Saadiyat Island and Yas Island representing the key retail locations over the long term. Plan Abu Dhabi 2030 predicts future retail supply to reach 4.1 million sq m to 2030.
There are a large number of retail malls currently under construction including Yas Mall, Dalma Mall,Emporium at Central Market and Deerfields Town Square. New supply forecast to 2015 will add 905,486 sq m.
Key projects under construction include:
The Deerfields Town Square project which is expected to be completed by Q2 2011. Located at Al Bahia, with a GLA of 90,000 sq m, the mall includes circa 200 shops including a 10,000 sq m (107,000 sq ft) Carrefour hypermarket.
Yas Mall on Yas Island is currently under construction with scheduled opening delayed until at least 2012. The mall has a GLA of 296,000 sq m, comprising 700 shops on three floors. Anchor stores are to include IKEA and Geant.
Sun and Sky Towers on Reem Island are part of a Sorouh development scheduled for completion in 2010. A boutique shopping mall comprising 8,040 sq m will open in the platform link between the two towers, in early 2011.
According to Colliers’ MENA Retail Overview, the Dubai and Abu Dhabi markets remain upbeat – Dubai for its established position as a global retail platform and entry point for international brands into the region, while Abu Dhabi for its forthcoming supply of retail space and strong domestic consumer purchasing power. With an existing supply of only 542,450 m² of retail space in Abu Dhabi, Colliers International says the market remains “relatively undersupplied” to the tune of 678,270m², based on current permanent population figures. However, according to Colliers, overall supply is forecast to increase by 112% to 1.1 million m² over the next five years making Abu Dhabi a potentially balanced retail platform by 2015.