New retail offerings to reinforce Dubai's reputation as a leading shopping destination

 

Cranes and skyscrapers are a familiar site on the horizon, but Dubai is soon to become home to a 210-metretall Ferris wheel, the Ain Dubai. Set to be the largest in the world upon completion, the wheel will act as the centrepiece of the Bluewaters Island project, a mixed-use development being built on reclaimed land by the government-backed holding company Meraas. The Bluewaters site will feature over 200 shopping and dining outlets when completed in 2018, and is one of the many new developments being built across the city.

Mall Growth

In its 2017 directory, the Middle East Council of Shopping Centres lists 101 malls in Dubai, including 20 that were either planned or under construction at the time of writing. The explosion in retail has also seen a number of new adaptations to the mall format that fuelled so much growth, with smaller community malls and high-end, low-rise developments offering a return to a high-street feel for shoppers accustomed to air conditioned malls.

According to real estate firm JLL, gross leasable area (GLA) allocated to retail space grew from 2.9m sq metres in 2014 to 3.4m sq metres by the end of 2016. As of the third quarter of 2017 an additional 101,000 sq metres was expected to be developed in the emirate by the end of 2017, followed by 536,000 sq metres and 361,000 sq metres in 2018 and 2019, respectively. Therefore, JLL estimates the total retail space in the emirate by the end of 2019 will encompass 4.46m sq metres, representing growth of 54% since 2014.

In 2017 Dubai accounted for 49% of all retail space in the UAE, and came in far ahead of other GCC shopping hubs, such as Abu Dhabi with 2.6m sq metres, Jeddah with 1.2m sq metres and Riyadh with 1.2m sq metres. The emirate is second only to New York in mall density. Of the 20 projects under construction, 15 are being developed by government-affiliated companies, with Nakheel Properties responsible for 10, Meraas for three, and Dubai Properties Group, part of Dubai Holdings, building two new malls as part of Dubai Sports City.

Saturation Point

AT Kearney’s 2017 Global Retail Development Index, an annual study that ranks the top-30 developing countries for expansion worldwide, puts the UAE in fifth place, behind India, China, Malaysia and Turkey. While the UAE remains the most attractive market in the region, the report expressed concerns about over saturation, even as growth opportunities continue to expand. According to figures cited by JLL, in the third quarter of 2017 there were single-digit percentage reductions in rents at some malls, with primary rent prices down 5% quarter-on-quarter (q-o-q), and 8% year-on-year (y-o-y). Rental costs for secondary retail spaces were down by 3% and 7%, q-o-q and y-oy, respectively. The vacancy rate grew somewhat to reach 12% in the July to September period of 2017, a four-percentage-point increase y-o-y.

However, real estate experts remain positive about the sector. In its “Dubai Real Estate Market Overview” report for the third quarter of 2017, JLL noted that while there are dangers of potential oversupply in the short term, there will also be pressure to deliver major projects so that vendors are able to capitalise on the opportunities offered by the coming international trade fair, Expo 2020. In addition, there were positive signs for the medium to long-term picture, despite the US dollar’s strong position and the 0.8% contraction in the sector’s contribution to GDP in 2016. Dubai’s retailers and mall owners can afford to open stores and operate them in anticipation of an uptick in business. “Overheads are low compared to European markets, with no business rates and lower staff costs than in other parts of the world. That means you can have a shop trading through a period of low footfall for some time. However, this is being addressed by retailers across the market,” James Lewis, head of Knight Frank Middle East, told OBG.

Nakheel Projects

Nakheel Developments, the contractor responsible for the Palm Jumeirah man-made archipelago, is planning to devote Dh16bn ($4.4bn) to new space in the next few years. Some of this spending will be directed at the Nad Al Sheba Mall, which will host three levels, 200 shops, restaurants and entertainment outlets, and 46,000 sq metres of GLA. Nakheel began leasing space to tenants in May 2017, and construction was scheduled to begin in the fourth quarter of 2017, reaching completion by mid-2020.

On Palm Jumeirah itself, the 420,000-sq-metre Nakheel Mall is being built as a retail and entertainment destination with 112,000 sq metres of GLA, comprising 350 units on five levels. Tenants already include Waitrose, Vox Cinemas, Adidas, French Connection and Montblanc. Due to open in 2018, the development will link directly to the 52-floor Palm Tower residential and hotel building. In addition, located on the tip of the Palm, the Pointe waterfront restaurant and shopping complex was expected to have opened by the end of 2017, and will consist of 150 seafront restaurants and shops, and be connected to the Palm Monorail. Another plan in the pipeline at Palm Jumeirah is the upscale beachfront community Azure Beach Club, which will have eight retail units on the eastern flank of the Palm, including a supermarket, waterside cafes and restaurants.

In April 2017 Nakheel opened its Jumeirah Islands Pavilion, featuring 14 shops plus waterfront dining options to serve a new Dh450m ($122.5m) town house community. Nakheel is also planning major developments in Deira, including the Deira Mall, which is scheduled to open in 2019 and will cover a total area of 576,000 sq metres, with 418,000 sq metres of GLA spread over three floors. Within walking distance of the new mall and planned to open by end-2018, the 1.9-km Deira Islands Night Souk will have 5300 rental units with access by both road and water.

Meraas Developments

Another state-backed developer, Meraas, is revisiting traditional themes with its Marsa Al Seef development on Dubai Creek, which opened to the public in September 2017. Hosting 496 stores and 65,543 sq metres of GLA, the project aims to revitalise the area and create a bustling shopping district. Also opening its doors in late-2017 was La Mer, a waterfront development with a beach, leisure and hospitality zones, and homes. Its 59 units were expected to include fashion brands alongside food and beverage (F&B) concepts. The Bluewaters development and Ferris wheel is also part of the Meraas portfolio.

Dubai Sports City

Located in Dubai Sports City, the shopping and dining strip Canal Promenade Retail opened in 2016 boasting a supermarket and community shops, a golf course and 8400 sq metres of GLA.

Ongoing developments for Dubai Sports City include the Arena Mall, which will have a total area of 176,516 sq metres and 139,355 sq metres of GLA spread across 300 outlets arranged over two levels. With anticipated weekly footfall of 365,000 people, the mall will have direct links to existing sports arenas, an outdoor stadium with a 25,000-person capacity and a 10,000-seat arena. Being developed by a subsidiary of Dubai Holding Company, the project is expected to open end-2018.

Avenues Mall

Opening shortly after the Arena Mall, Avenues Mall Silicon Oasis, a development by the Abu Dhabi-based retail giant Lulu Hypermarket, is scheduled to open in the first quarter of 2019. Anchored by a 9089-sq-metre supermarket and a department store, the Avenues Mall will cover 117,500 sq metres, providing a contribution of 82,502 sq metres of GLA. It will also include 216 units on three levels, with 13 restaurants and a food court with 25 outlets.

Cityland Mall

Another large mall, the Cityland Real Estate Development, aims to serve the 200,000 people living in the Dubailand complex, which is itself under development. Being built on Sheikh Zayed Road, the Cityland Real Estate Development Company estimates 52% of the emirate’s population will be within a 20-minute drive of the new mall. The single-storey development will have 350 outlets and a 110,000 sq metres of GLA on a 168,498-sq-metre site. Cityland will incorporate its own botanical gardens into the project.

Smaller Malls

While the large complexes tend to be major attractions, smaller properties hold a sizeable share of the market. In April 2017 local company Aswaaq opened its 13th community mall under the Mart brand name at Park Centre Mirdif – an 80-unit development by local firm Citadel Properties with 55,000 sq metres of GLA. Meanwhile, focusing on price-conscious consumers, Dubai Properties Group is behind the outlets at the Jumeirah Beach Residences – more commonly known as JBR – which will provide 20,000 sq metres of GLA and include 60 retail and F&B outlets. The shops will sell off-price and outlet offerings.

Adding to the developments opening up in Deira, Burj Nahar Mall is being built by Dubai-based Al Majid Property Company. It will feature 22,500 sq metres of GLA over three levels, a family entertainment centre, F&B outlets, shops and a hypermarket. The mixed-use project was due to be completed by the end of 2017. With new communities to serve, as well as developments that aim to reinvigorate existing districts, community malls are increasing the number of retail options available to residents of and visitors to Dubai, alongside new destination malls and upscale waterside developments.

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The Report: Dubai 2018

Retail chapter from The Report: Dubai 2018

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