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The emirate now accounts for more than 50% of the total retail space across the UAE, and until recently its malls enjoyed extremely high footfalls, with the Mall of the Emirates alone averaging two million visitors per month.
Despite the large number of malls in Dubai, occupancy rates in destination shopping malls in the emirate are nearly 100%, with average occupancy levels over 90% across the market, according to a study by Colliers.
The most recent high-profile opening in the emirate was Dubai Mall, which was built by Dubai-based developer Emaar.
Sprawling over 12 million square feet (equivalent in size to more than 50 soccer pitches), Dubai Mall will have over 1,200 stores when fully operational, which would be the most of any shopping centre in the world.
Emaar is also operating two other malls in Dubai; Souk Al Bahar, an Arabesque shopping and entertainment development in Old Town, and Dubai Marina Mall, which will have 600 stores and 390,000 square feet of leasable space.
Not to be outdone, rival developer Nakheel says it plans to build 100 malls in the emirate over the next 20 years, and is currently spending over $100m to more than double the leasable area of Ibn Battuta Mall.
Meanwhile, the largest shopping behemoth being planned for the emirate is the $817m Mall of Arabia in Dubailand. With 930,000 square metres of space to rent, Mall of Arabia is slated to have almost twice as much retail space as Dubai Mall.
However, the project, which is being built by local firm Mustafa Galadari Group, is running behind its original mid-2009 completion date, and it is not expected to be completed until 2010 at the earliest.
Slowdown looms
Analysts warn that the boom times for Dubai retailers appear to be over for the immediate future as the financial crisis deepens.
'With the economic downturn and the likelihood that population growth will be very minimal or possibly even negative in the short term in Dubai, it goes without saying that the retail market in the emirate will be affected,' says Firas Eid, a Partner in Deloitte Consulting.
Footfall over the past few months has been less than in previous years as people have decided to hold off on big purchases amid concerns about layoffs.
The difficulty that retailers face is that not only are residents spending less, but tourists - who account for a large portion of consumer spending in Dubai - are cutting back on their travel to the emirate.
The malls that will be least affected are the ones that enjoy a prime location and have the highest footfall, Eid says. In a report issued last month, Colliers predicts that oversupply will hit smaller, older malls hardest, and says they will need to reposition themselves to appeal to specific market segments. The report argues that larger malls with a strong mix of tenants and more leisure amenities will triumph.
In terms of specific products, demand for luxury items is likely to take a greater hit compared to basic commodities like clothes and food, which remain necessities for the consumer, Eid says.
All of this is putting increasing pressure on Dubai retailers, who are currently paying the most expensive rents in the UAE.
Jeff Florian, Senior Reporter
