Dubai’s famous mega-malls are doing brisk trade, with the companies behind the emirate’s two biggest shopping centres reporting double-digit revenue growth in 2014. Additionally, plans for further expansion are also in the works.
Emaar Properties, the owner of The Dubai Mall, said recurring revenues from its shopping malls, retail and hospitality business rose 12% year-on-year (y-o-y) to Dh5.4bn ($1.5bn), accounting for more than half its total revenue. Retailers at The Dubai Mall posted 14% growth in sales in 2014 y-o-y after 80m visitors passed through its doors.
Majid Al Futtaim Holding, owner of Mall of the Emirates, posted revenue growth of 11% to Dh25bn ($6.8bn). The group, which owns 17 shopping malls across the MENA region as well as the Carrefour franchise in 12 countries, said its malls and hotels business recorded a 6% rise in footfall to 167m customers.
Major expansion works
The two malls are in the midst of major expansion works to meet the growing retail demand in Dubai, with plans to create new offerings for shoppers, diners and tourists. Emaar Malls is adding 93,000 sq metres of new space to create a “Fashion Avenue”, with the aim of expanding its footfall to 100m visitors a year. Measured by its total area of 1.12m sq metres, the mall is the biggest in the world, with 350,000 sq metres of gross leasable area (GLA).
Majid Al Futtaim is undertaking a multi-stage Dh1bn ($272.2m) re-development of its flagship Mall of the Emirates − dubbed Evolution 2015 − and set to be completed by the third quarter of 2015, after opening its Dh100m (27.2m) 5,000-sq metre Fashion District in February last year. The project includes the addition of 25,000 sq metres of GLA to Mall of the Emirates, including a VOX cinema and 12 new restaurants. Majid Al Futtaim has pledged to invest Dh3bn ($817m) in Dubai in the run up to Expo 2020 and said in January it plans to double its business within five years.
However, by 2020, Dubai is set to have a shopping centre that will dwarf both The Dubai Mall and Mall of the Emirates.
In July 2014, Dubai Holding announced plans to build a temperature-controlled shopping zone named Mall of the World. Covering 4.5m sq metres and with 743,000 sq metres devoted to pedestrian shopping streets, Mall of the World will include hotels, a theme park, wellness district and entertainment venues. Construction of the mall is likely to begin in the first quarter of this year with the first phase expected to be ready in three years.
Room for everyone
With more modern retail space per person than all other markets in the region, Dubai in theory should have difficulty in justifying any expansion. Yet that would underestimate the emirate’s plans to double its number of tourists to 20m by 2020 – after attracting a record 5.8m tourists in the first half of 2014 − and also to expand its resident population.
Dubai is the second most-popular retail destination globally after London according to property consultant CBRE’s annual survey, while also being the most popular shopping destination for high net worth individuals. Dubai alone represents 30% of the total Middle East luxury sales and 60% of the UAE’s luxury sales, according to a report by Alpen Capital published in January 2015.
Dubai Holding expects Mall of the World’s shops, wellness centres and other attractions to be able to cater to 180m visitors a year. And five years ahead of its completion, retail experts in Dubai say the new mega-mall will not pose a significant threat to Dubai Mall or Mall of the Emirates. “The type of retail you have at The Dubai Mall, with the dancing fountains and the Olympic-size skating rink and the aquarium with the largest alligators and crocodiles in the world, and Mall of the Emirates, with its ski slope, they will always hold their own in their niche,” David Macadam, CEO of Middle East Council of Shopping Centres told OBG. “If you are going from 10m visitors today to 20m in six years, I see these malls continuing to trade the way they are.
Interest from investors in the sector is also surging. Last autumn, investors were given the opportunity to buy a stake in two retail businesses in Dubai with the flotation of Emaar Malls Group and start-up Marka. The latter was the first IPO in five years on the Dubai bourse and was 36 times oversubscribed with the listing raising $75m. This was followed within a few days by the Emaar offering, which raised Dh5.88bn ($1.6bn). Marka, which was established as a start-up with Dh500m ($136.1m) in capital, plans to buy international brand franchises in the retail and food and beverage sectors. These IPOs and the spate of new retail projects all reflect confidence in the sector’s growth potential for some time to come.