Abu Dhabi: Shopping with confidence

Rising confidence among local consumers is being matched by the steadily strengthening economy, both of which should encourage spending in Abu Dhabi’s retail sector.

The results of two recent consumer confidence surveys both found that shoppers in the UAE were among the most positive in the world. In a study conducted by online jobs site Bayt and research firm YouGov covering the month of October, the UAE had the highest consumer confidence index rating in the Gulf region, and the highest ranking on the survey’s propensity to consume/spend index.

These findings were backed up by those of a report released in late October by the market research firm Nielsen, which found that consumer confidence in the UAE was the fourth-highest in the world in the third quarter of 2012, behind only Indonesia and India, who were tied for top spot, and the Philippines.

It is not just locals who are keen to shop in the country: a recent study conducted by international real estate services firm CB Richard Ellis, released at the end of October, showed that the Middle East is the most-favoured destination for European retailers when expanding outside their home market.

It also noted that within the UAE much of the scope for expansion was occurring in Abu Dhabi, suggesting that new entrants may take a closer look at the emirate, as it offers the potential to launch into new retail space.

To meet this expected demand, Abu Dhabi is expected to have an additional 260,000 sq metres of gross leasable area delivered by the middle of 2013, adding to the existing stock of 1.7m sq metres, according to an October report issued by Jones Lang LaSalle, an international real estate firm.

Among the new developments are the soon-to-open Capital Mall located at the Mohammed Bin Zayed City, with more than 270 outlets and retail space of 60,000 sq metres anchored by a Lulu hypermarket, and the $190m Deerfields Town Square at Al Bahia, currently set to open its doors on 80,000 square metres of shopping area late this year or early 2013, with lead tenants including Carrefour and clothing store Centrepoint.

“Given the spending power of the local population and additional growth from increasing tourism, there remains significant demand for retail space in the Abu Dhabi market. … The delivery of upcoming projects will help address this unmet demand,” the report said.

Indeed, the retail sector is already one of the main beneficiaries of the increasing number of international sporting events being hosted by the emirate, the most recent of which was the Abu Dhabi F1 Grand Prix at the beginning of November. A number of the emirate’s leading emporiums reported a sizeable increase in footfall during race week, with mall chain Lulu putting the rise in customer numbers well above average.

“It is fair to say we have seen 25-30% more shoppers during this time,” said V Nandakumar, a spokesman for Emke, the owner of Lulu, while speaking with local daily The National on November 5. “Even last year we noticed this phenomenon.”

Along with other events, such as international golf and tennis tournaments and yacht races, the F1 Grand Prix brings in overseas visitors, competitors and the media, serving to boost the local economy, particularly the hospitality and retail sectors.

While the Department of Economic Development expects Abu Dhabi’s economy to grow by 3.9% this year, down from earlier projections of around 4.5%, much of this expansion is coming from the non-energy sector, including retail. The department estimates non-oil economic activity will increase by 5.5% this year and 6.5% in 2013, helping to push up GDP by an average of 5.7% annually for the coming four years.

This steady increase in GDP will help underpin growth in the retail sector, as will the solid consumer sentiment among residents in the emirate. However, some care to be taken to ensure new retail space is brought on line to match any rising demand, in order to keep any risk of oversupply in check. As long as this balance is maintained, the sector should continue to advance through the coming years.

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