PHOTO
29 May 2016
Dubai needs more large-scale malls in order to curb rising retail rents, according to one of the emirate's biggest family trading companies, which manages over 370 brands.
The emirate is famous for its impressive retail landscape, with consultancy firm Savills ranking it fourth in its Global Retail Destination Index 2016 ahead of London's Regent Street, New York's Fifth Avenue and Paris' Champs-Elysees.
Dubai is already home to The Dubai Mall, the world's largest retail hub, and Mall of the Emirates, and there are more mega retail projects in the pipeline. Dubai Holding is working on Mall of the World, which will span a land area of 1.7 million square metres. Ilyas and Mustafa Galadari Group has said it is committed to developing the stalled Mall of Arabia retail complex, initially announced in 2008, in the next 10 years.
Abdulla Al Gurg, group general manager of Easa Saleh Al Gurg Group LLC (ESAG) told Zawya he believed another mega mall was needed in order to bring the rising retail rental rates under control.
"I think rental is a bit of an issue... There is strong governance here in the UAE [United Arab Emirates] on [residential] tenancy rental, but commercial rent and malls we need to try to focus on," he said.
"A new destination is the key element of changing the economics of that sector. I think there is scope," he said, adding that if Emaar or Mall of the Emirates operator Majid Al Futtaim opened another big destination mall it would attract a following and it would "make a big difference".
Impressive returns
Dubai's malls are renowned for their glitzy extravagance and for showcasing record-breaking attractions from the world's largest aquariums to indoor ski resorts or sky diving. But this does not come cheap and the rental levels often reflect this.
Rental rate averages can go up to 9,000 dirhams ($2,450) per square metre per annum at top tier malls such The Dubai Mall and Mall of the Emirates, according to Craig Plumb, head of research at real estate consultancy JLL.
Emaar Malls Group, which manages 18.5 percent of the 3 million square feet (sq ft) of retail gross leasable area in the city, increased retail rents by 25 percent last year, according to real estate broker Knight Frank.
The rising rents obviously have not put retailers off; Emaar is expanding The Dubai Mall and its rival Mall of the Emirates added a third floor last year in order to cater to demand.
Retail analysts agree with Al Gurg's assessment that more malls are warranted to rein in rising rents.
"As Dubai's population continues to grow, it enhances its position as a regional hub and the number of visiting tourists reaches 20 million there will be a demand for more mega malls. Retail thrives on competition and this is what creates the 'buzz' in the ever changing world of retail," Andrew Williamson, head of retail for the Middle East at JLL, told Zawya.
Dubai's retail market was valued at $35.4 billion last year and is forecast to grow 7.7 percent in 2016, according to a Dubai Chamber report released ahead of the World Retial Congress in April. An average of 8.1 percent growth per year is estimated between 2017 and 2020, when retail turnover is expected to surpass $52 billion.
Luxury retail blues
While sales are growing, Al Gurg believes the luxury sector had been impacted in the past year by the stronger dollar and a fall in the number of high-spending Russian and Chinese buyers.
"Maybe the fashion retail is suffering, if I may be honest or direct, as the buyer is in a situation where the sentiment is 'take care, don't spend so much money'. The buyer [who] might have bought a Louis Vuitton bag for 2,000 dirhams before might think twice now. They are a bit more conservative, that is the only change in sentiment I see."
He said day-to-day retail items were still holding up well.
ESAG manages 28 companies, mainly in the retail, building, construction and industrial sectors. With more than 370 individual brands, its portfolio includes household names such as Siemens, British American Tobacco, United Colours of Benetton, Dunlop, Armitage Shanks, Siematic, Smeg and the Unilever range of products.
"I think the sentiment is very positive in the UAE. I am talking generally when it comes to retail and when it comes to our operations. On the tobacco side people are smoking more because maybe they are stressed. On the Unilever side, people are washing their hair more and buying more Nivea [skincare] products," he said.
As a result, Al Gurg has forecast that the group's retail and lifestyle sector will see significant growth of 26 percent year-on-year this year, compared to around 11 or 12 percent growth predicted for its industrial, building and construction sectors.
© Zawya 2016
Dubai needs more large-scale malls in order to curb rising retail rents, according to one of the emirate's biggest family trading companies, which manages over 370 brands.
The emirate is famous for its impressive retail landscape, with consultancy firm Savills ranking it fourth in its Global Retail Destination Index 2016 ahead of London's Regent Street, New York's Fifth Avenue and Paris' Champs-Elysees.
Dubai is already home to The Dubai Mall, the world's largest retail hub, and Mall of the Emirates, and there are more mega retail projects in the pipeline. Dubai Holding is working on Mall of the World, which will span a land area of 1.7 million square metres. Ilyas and Mustafa Galadari Group has said it is committed to developing the stalled Mall of Arabia retail complex, initially announced in 2008, in the next 10 years.
Abdulla Al Gurg, group general manager of Easa Saleh Al Gurg Group LLC (ESAG) told Zawya he believed another mega mall was needed in order to bring the rising retail rental rates under control.
"I think rental is a bit of an issue... There is strong governance here in the UAE [United Arab Emirates] on [residential] tenancy rental, but commercial rent and malls we need to try to focus on," he said.
"A new destination is the key element of changing the economics of that sector. I think there is scope," he said, adding that if Emaar or Mall of the Emirates operator Majid Al Futtaim opened another big destination mall it would attract a following and it would "make a big difference".
Impressive returns
Dubai's malls are renowned for their glitzy extravagance and for showcasing record-breaking attractions from the world's largest aquariums to indoor ski resorts or sky diving. But this does not come cheap and the rental levels often reflect this.
Rental rate averages can go up to 9,000 dirhams ($2,450) per square metre per annum at top tier malls such The Dubai Mall and Mall of the Emirates, according to Craig Plumb, head of research at real estate consultancy JLL.
Emaar Malls Group, which manages 18.5 percent of the 3 million square feet (sq ft) of retail gross leasable area in the city, increased retail rents by 25 percent last year, according to real estate broker Knight Frank.
The rising rents obviously have not put retailers off; Emaar is expanding The Dubai Mall and its rival Mall of the Emirates added a third floor last year in order to cater to demand.
Retail analysts agree with Al Gurg's assessment that more malls are warranted to rein in rising rents.
"As Dubai's population continues to grow, it enhances its position as a regional hub and the number of visiting tourists reaches 20 million there will be a demand for more mega malls. Retail thrives on competition and this is what creates the 'buzz' in the ever changing world of retail," Andrew Williamson, head of retail for the Middle East at JLL, told Zawya.
Dubai's retail market was valued at $35.4 billion last year and is forecast to grow 7.7 percent in 2016, according to a Dubai Chamber report released ahead of the World Retial Congress in April. An average of 8.1 percent growth per year is estimated between 2017 and 2020, when retail turnover is expected to surpass $52 billion.
Luxury retail blues
While sales are growing, Al Gurg believes the luxury sector had been impacted in the past year by the stronger dollar and a fall in the number of high-spending Russian and Chinese buyers.
"Maybe the fashion retail is suffering, if I may be honest or direct, as the buyer is in a situation where the sentiment is 'take care, don't spend so much money'. The buyer [who] might have bought a Louis Vuitton bag for 2,000 dirhams before might think twice now. They are a bit more conservative, that is the only change in sentiment I see."
He said day-to-day retail items were still holding up well.
ESAG manages 28 companies, mainly in the retail, building, construction and industrial sectors. With more than 370 individual brands, its portfolio includes household names such as Siemens, British American Tobacco, United Colours of Benetton, Dunlop, Armitage Shanks, Siematic, Smeg and the Unilever range of products.
"I think the sentiment is very positive in the UAE. I am talking generally when it comes to retail and when it comes to our operations. On the tobacco side people are smoking more because maybe they are stressed. On the Unilever side, people are washing their hair more and buying more Nivea [skincare] products," he said.
As a result, Al Gurg has forecast that the group's retail and lifestyle sector will see significant growth of 26 percent year-on-year this year, compared to around 11 or 12 percent growth predicted for its industrial, building and construction sectors.
© Zawya 2016
