Kuwait retail supply lags behind consumer demand

The turnover for the retail sector in the GCC exceeds $100bn each year in a region which has the fastest retail market growth in the world.

There has been a huge growth in investment since the 1990s.

In that decade the available retail space was less than one million square metres with only 20 brand names in the country.

Today retail space is expected to reach 280 million square metres between 2011 and 2016, and there are already over 500 brand names in the market.

Kuwait, which has a population growth of 7% annually and a 10% increase in incoming expatriates, has seen rising demand supported by increasing purchasing power.

By the end of 2006, retail spaces were estimated at 345,000 square metres.

Growth in Kuwait's retail space

Colliers International expects Kuwait to have the third largest supply of retail space in the Gulf, with an expected growth of 10% by the year 2010.

The average retail space per person in Kuwait is expected to rise to 0.32 metres, compared to an average of 0.66 metres for the GCC as a whole.

In addition to the traditional souks, a number of relatively small shopping centres (The Avenues and Marina Mall being the exception) are found in the country.

These include Al Salhia which has a number of international brands, Al Raya Centre located near Courtyard Marriot Hotel and owned by Al Salhia Real Estate company, which also owns Al Salhia Mall, Souq Sharq, Al Fanar and Al Bustan.

Kuwait has 349,000 metres squares of retail space planned or under construction, which are scheduled to be completed by the end of the year.

Experts working in retail business say that, before the opening of The Avenues and Marina Mall, shopping centres in Kuwait would serve the local needs only.

This trend has changed after modern and contemporary shopping centres started to appear in the country, such as the Souq Sharq Centre.

Increase in rental charges

The spread of shopping malls in the country has pushed rents for retail spaces up, even in old malls.

Rent for one square metre on Souq Sharq ground floor, for example, is between KD18-KD25 and between KD28 to KD40 at the mezzanine floor according to a report by Capital Real Estate Co.

The rent at Al Salhia mall averages between KD28 to KD40 in the ground floor compare to KD20 to KD32 at Marina Mall and KD22 to KD40 at Al Raya Mall.

According to Kuwait's Financial Centre, the average rent for retail spaces in Kuwait increased by 17% in 2006, compared to 2005.

Prices are expected to stabilize, or even fall, when malls currently under construction come online.

Demand outstrips supply

Demand for retail spaces in Kuwait is far higher than current supply, especially at the main commercial centres, where increased purchasing power makes traders willing to pay more for space.

Many international brands already exist in Kuwait either through extended franchises or through local partners and agents.

Capital Real Estate Company believes that the inability of international brands to operate on their own represents a big obstacle to growing retail business.

GCC rules and regulations require these brands to operate under local partnerships or through extended chains.

Another problem is the unavailability of parking spaces at many of Kuwait's shopping malls. Al Raya Mall is the exception with parking for 1,500 cars, while Souq Sharq and Marina have capacity for only 800 to 1,100 cars.

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