The Gulf has become a rich hub for retailers over the past few years, especially those selling luxury goods through the region’s diverse retail space offerings, from mega malls to community malls and other shopping destinations.
However, several elements, including a drop in the flow of large-spending tourists, such as the Russians and the Chinese, coupled with the drop in oil prices and other economic fluctuations, led to a decline in the spends of consumers.
In light of this, the continuation of heavy investment into the retail sector, mainly through the construction of more shopping malls, might confuse many.
Last week, Emirati real estate and retail conglomerate, Majid Al Futtaim Group, announced new investments worth AED 30 billion (USD8.17bn) in the UAE over the next ten years. The amount increases the total investment of the group in the country to AED48bn.
According to the firm, the money will go into establishing ten new City Center shopping malls, expanding six existing malls amd building more mixed-use properties and hotels across the UAE.
The news has taken retail experts by storm, as the continuous push seems at odds with the current frail scenario. To Cyrille Fabre, partner at research and management consulting firm Bain & Co., such investments translate into the region’s last leap to establishing itself as a mature retail hub.
“By 2020, many cities in the region would have reached a maturity stage for square metre per capita,” Fabre said at arab luxury world, a two-day conference on the region’s luxury business organised by Mediaquest, AMEinfo’s parent company, held last week in Dubai.
He explained that the heavy investments now read as “a last push” until 2020. “By then, I think the region will be well stocked with malls and will be mature.”
Exploring the current scene in the industry, Fabre noted that the number of mega malls and the rents for tenants in these malls have “increased quite dramatically, depending on store performance.” He noted that this upward trend continues despite the low performance of some of the tenants.
“But if you take a step back and look at other malls, as sales per square metre go down, we will see rent go down in second-tier malls. We are also seeing that they are offering conditions to attract tenants,” Fabre added.
Many are amazed at how Dubai continues to invest in malls, when there seem to be too many of them in the emirate. However, Fabre said there is still some more room in the GCC region.
“There is still a space for large luxury outlets in Saudi Arabia,” Fabre said, providing an example.
In Qatar, a new premier retail destination, the “Mall of Qatar”, is set to open its doors to consumers on October 29. The mall already has more than 100 tenants fitting up their shops, with another 200 expected to start in the coming weeks.
Situated next to Al Rayyan FIFA 2022 stadium, Mall of Qatar is looking to become a new regional destination for shoppers. It spans 5.4 million square feet with more 500 retails shops and a five-star luxury hotel.
It also offers an array of entertainment outlets, including the world’s largest IMAX Laser 3D projection system.