Dubai has witnessed a seismic shift since 2004 in the total gross leasable area (GLA) in retail shopping opportunity. With over three million square metres currently available from super regional to community retail, the variety for residents and tourists alike is formidable. The strategic positioning of the GCC’s malls makes them more than a place to simply shop; they are now places to meet and be entertained for the whole family. It is not just attractions for the hot summer months, but also for the pleasant winter climate.
New retail offerings such as City Walk and The Beach offer outdoor retail destinations which are predominately food and beverage (F&B) focussed. Other developing projects such as d3 by Tecom, will be a new business park that will offer a range of unique F&B and retail offerings within the first phase of the design district master plan.
Latest trends in retail
Currently in Dubai there is a shift towards community retail to serve local residents as everyday malls. City Centre in Me’aisem, is the latest $75m community mall to be released to the market by Majid Al Futtaim. This centre provides 55 shops and is anchored by a Carrefour Supermarket and Magic Planet. The purpose of a 24,000 square metre community mall is to provide the essential amenities such as a supermarket, hairdresser, coffee stores, pharmacy and banks. The locality within residential communities and ease of parking is a key driver for consumers choosing a community mall over a regional or super regional mall. However, the larger malls are positioning themselves in a different market and improving their access, such as links to the metro and additional parking. Mall of the Emirates has just added an additional 1,300 car parking spaces this summer which again will hope to draw more consumers to choose the mall due to its excellent location, parking and extended range of shops.
There are currently press statements released by the larger developers for an additional 600,000 sqm of GLA in Dubai over the next couple of years, with additional projects ‘on hold’ there is significant supply which could be delivered to the market. However, we do not expect all of these to be completed or delivered on schedule due to the size and complexity of the projects, which will allow the market to absorb GLA and older malls to modify their position and shopping experience.
In a city which is renowned worldwide for launching mega projects, Dubai has not seen a significant super regional mall delivered in over five years. However, upcoming projects such as Meydan One and Mall of the World (gross development value of c. $6.8bn) – which will be a mixed-use community with the world’s longest indoor ski slope, a 25,000 square metre indoor sports facility, a 100 berth marina, city beach and a civic plaza – if delivered could help drive footfall into Dubai’s retail tourism sector.
Tourism and retail
With Dubai International Airport overtaking London Heathrow as the world’s busiest airport with 70 million passengers a year and the increase in the hotel keys, the continued drive for expanding the tourism sector is key. The retail offering will adapt with the market as well, as new international markets are opened up with Emirates and other airline carriers, we will see new tourist flows. Currently the top three international countries for tourists include Saudi Arabia, India and the United Kingdom. With global financial markets remaining precarious, the Russian economy under pressure and the Chinese economy faltering, we may see a continued slow down or reduction in consumers purchasing luxury goods. However, the world never remains the same and with the forthcoming sanctions being lifted on Iran, Dubai is poised to witness a large new consumer market closer to home.
Dubai has always positioned itself as a luxury destination, this balance is now changing with new initiatives to increase the number of hotel rooms in the mid-market and budget sector which will have a consequential shift in consumer retail spend and retail habits. This drive into a new market sector has been encouraged by incentives by the Dubai authorities and therefore early traction is expected. As new malls are developed we expect to see additional GLA being focussed on this market segment to capitalise on mall footfall and spend. New activities and attractions are being created in Dubai’s malls to enhance the length of stay of its consumers as well as their tenant mix as they adapt to their target audience.
Dubai is positioned as a city beach destination, but currently has a relatively low length of hotel nights stayed, compared to global cities such as London and New York, which will impact spend per head in the city. By having more affordable hotels in the city this can only but provide this opportunity and support the retail market’s future growth.
Obstacles to market growth
The GCC retail market is developing rapidly with new mall projects under construction in every country, this development of new retail GLA will affect the consumer spend in Dubai. Saudi Arabia is one of the three biggest tourism markets for Dubai and with new malls and expansion projects underway, we expect this to affect retail spend in Dubai, although may not affect tourist numbers coming to Dubai as a weekend destination. This coupled with Dubai’s higher luxury good prices compared with cities such as London and New York, which are frequently visited by the resident population to purchase expensive one off luxury items, Dubai must ensure its positions itself to attract high spend per capita as well as footfall. This may be a short term concern as exchange rate fluctuations with the Euro, which has allowed some retailers to purchase new product lines at ‘reduced prices’ and help Dubai remain more competitive globally and attract retail consumers.
Dubai’s retail sector is dependent not only on the resident population, but also foreign visitors to support the existing GLA or planned projects and therefore must keep adapting and positioning itself to attract people to live, visit and enjoy the array of retail opportunities the city has to offer.