Dubai: Despite challenging market conditions and potential oversupply, 2017 is set to be a bumper year for retail projects on all fronts in the emirate of Dubai, figures show.
Over $4 billion of mall projects will be awarded in 2017, compared to $502 million last year and $812 million the year before that, according to data from project tracking service MEED (Middle East Economic Digest) Projects.
Dubai has long sought to establish itself as a shopping destination, luring tourists from around the world with the biggest and best retail establishments.
Growing numbers of tourists, great deals and tax-free salaries spurred a decade-long boom in the retail sector, including mega-malls, such as the largest in the world — the Dubai Mall, and a wave of community centres.
In many ways, that trend looks set to continue in 2017, as Dubai seeks to ramp up visitor numbers and general economic activity ahead of Expo 2020.
Among the contracts set to be awarded in 2017 for retail projects is the first phase of Dubai Holding’s Mall of the World, the largest ever shopping centre of its kind. The Phase 1 contract for Mall of the World is valued at $1 billion. Other large projects set to be awarded this year include Emaar’s Dubai Hills mall ($763 million) and Dubai Creek Harbour retail district ($1 billion), and Nakheel’s Deira Island mall ($900 million).
But, according to Gaith Shocair, CEO of Majid Al Futtaim Shopping Malls, one of the leading developers in the country, “the successful development of shopping malls is not simply a case of build it and they will come. It is highly complex.”
To compete, retailers must ensure they are “driven by insight into consumer behaviours and attitudes”, in order to stay agile and keep customers loyal.
Steven Cleaver, director at Al-Futtaim Group Real Estate’s shopping centre business, believes that to be successful in such a competitive market, developers must keep “pushing the boundaries and going above and beyond expectations.”
“The UAE is an incredibly dynamic market that is constantly evolving. This kind of environment is a fantastic driver of originality and innovation, where we look to surprise and delight our customers who have very high expectations.”
There is one segment of the market that is expected to continue growing: community malls, according to Matthew Dadd, Head of Commercial at Knight Frank Middle East.
For Anurag Bajpai, the Head of Retail at KPMG, the current retail offering in Dubai is sufficient to cater to its residents and visitors.
However, as the number of visitors continues to increase over the next few years, “this could create further room for growth — especially if mall developers are able to develop new and exciting concepts, for instance pedestrian friendly retail concepts, or innovative leisure and entertainment concepts.”
Dadd agrees, “developers need to understand these trends to ensure that the mall is a destination and not just a shopping centre.”
Seemingly confirming these statements, Reem Mall, the $1 billion development in Abu Dhabi, announced in October 2015 that it will be home to the largest indoor snow-play park in the world.
But with the dollar at the highest level it has been since 1986, political and economic uncertainty in Europe, Russia and the US, low consumer confidence and e-commerce picking up pace and popularity in the region, the outlook for some is gloomy.
“This is an ongoing trend from 2016, and all retailers and mall operators and developers need to review new target markets and how to incentivise local shoppers. This will have an impact on the feasibility of mall developments,” said Matthew Dadd, Partner and Head of Commercial at Knight Frank Middle East.
He said new projects will face increased internal scrutiny to ensure their feasibility in a highly competitive [retail] market and subdued consumer market. The fall in the Pound Sterling since the EU Referendum has made shopping in the UAE very expensive for British tourists, historically a key demographic for the country’s malls. This hit to retailers has been compounded by a drop in visitors from Russia, which has had economic sanctions placed on it, causing the Rouble to fall.
“Any major changes in source markets are a cause for concern, but we actively manage and rebalance our demand using a number of marketing and promotional activities. Our shopping malls business is well diversified and resilient,” said Shocair.
Over $3 billion worth of retail projects that were due to be completed in 2017 have subsequently been cancelled or placed on hold. However, the vast majority of this figure comes from the cancellation of a $2.7 billion shopping mall in Bawadi, close to Dubailand, owned by Al Ghurair Investments, according to MEED Projects. A further $145 million in retail projects set for 2018 and 2019 have been nixed.
Some are more upbeat, however.
“Despite the fact that many retailers have witnessed a slowdown in their business in the aftermath of the drop in oil prices and the reduced consumer spending, the more established malls with higher footfalls have been doing fairly well. However some of the other malls have been feeling the pinch,” said Anurag Bajpai, Partner and Head of Retail at KPMG.
That pinch is not only being felt in Dubai.
In Abu Dhabi, the only other emirate that really compares to Dubai in terms of retail investment, the Al-Falah Mall and a Saadiyat Island project named The District have both been placed on hold, according to data from MEED Projects. They were awarded in 2016, at a total value of $439 million.
Despite that, Shocair stated that Majid Al Futtaim were optimistic about Abu Dhabi: “according to independent research that we commissioned last year, retail spend is expected to increase in Abu Dhabi, from Dh56.5 billion in 2016 to Dh98 billion in 2021.”
The CEO said that this increase would be predominantly driven by population growth.
Despite projects being halted, elsewhere in the capital work is moving ahead full steam.
The big ticket item in 2017 is Reem Mall, on Reem Island, likely to be awarded to Al Futtaim Carillion, who also worked on the Dubai Mall and the Deira City Centre Mall. In July 2016 they were named as preferred bidder on the contract by the developer, according to Shane Eldstrom, the chief operating officer for Reem Mall. The contract is valued at $1 billion, making it the most expensive mall in Abu Dhabi’s history.
Reem Mall is set to open within months of another high value retail project in the capital. The mall at Al Maryah Central, a mixed-use development also including a hotel and residential complex, is expected to be delivered in March 2018, according to Faithful+Gould (who are providing cost management consultancy on the project), and will consist of a 400-store, 2.3 million square foot shopping centre, featuring the first Macy’s outside of the United States.
The contract is valued at $409 million, and being undertaken by Brookfield Multiplex.
For information on the real estate sector, within the UAE, please visit our sister site, GNProperty.com.
Our editors found this article on this site using Google and regenerated it for our readers.
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