Retail in the Middle East

Lionel Dore
Retail has been one of the fastest growing sectors in certain parts of the Middle East for the last decade, remaining buoyant during the global downturn and now spreading into relatively untapped markets.

The Middle East retail culture has evolved from traditional outlets to large shopping malls, hypermarkets, supermarkets, and major local & international brands. Changing consumer demographics, a large expatriate population, rising purchasing power, and, of course, petrodollars have brought premium and luxury brands to the region.

The Middle East retail culture has evolved from traditional outlets to large shopping malls, hypermarkets, supermarkets, and major local & international brands.

There are regional variations, from the United Arab Emirates (UAE) more mature retail offer, with greater saturation of large malls, to the emergent countries which still have plenty of scope for development potential – Saudi Arabia, for instance, where there is considerable unmet demand.

Even in the mature markets like Dubai, however, there is still ample opportunity for neighbourhood malls and ‘mini malls’. Abu Dhabi has traditionally lagged behind Dubai, but two large malls are due to open this year, with three or four more in planning. There is certainly scope for further growth.

The larger developments target broad lifestyle appeal, going beyond shopping to improve the total customer experience. They aim to act as a social hub for families and friends, offering air-conditioned environments with food & beverage, cinemas, bowling, etc. Mall leisure and entertainment offers are core drivers of retail footfall and have become more competitive and ambitious. Attractions ranging from skiing and aquariums to indoor sky diving and children’s educational play centres.

In this competitive arena, developers differentiate on scale, quality, accessibility, and introduction of new brands to the locality.

In this competitive arena, developers differentiate on scale, quality, accessibility, and introduction of new brands to the locality. Anchor stores are important for the major malls e.g. Bloomingdales and House of Fraser.

In more mature markets, a mall’s popularity may decrease over time. Footfall lessens; tenant mix decreases and the mall can slide into a secondary position. I see a lot more refurbishments coming to market of late - in Dubai, for example - with owners often adding new leisure offers to revitalise their business proposition and recapture/retain their customers, as well as a general refurbishment to raise the overall standard.  This will continue as competition becomes ever more fierce.

Faithful+Gould has developed a hub of specialist expertise from our Dubai office, collaborating with our regional offices to work with clients in each country. Our strengths include an excellent understanding of the Middle East retail sector, which enables us to support clients from the earliest speculative stages. I find that clients often ask us to produce ball-park figures where only a piece of land exists, together with ideas for the building, infrastructure and car parking planning. We have the capability to be able to respond to this and it is great to be involved at such an early stage of development, where real value can be created or lost.

Our understanding of the sector is demonstrated by solid benchmarking data which enables us to challenge and interrogate development plans...

We also work with tenants, often managing enhancements to meet corporate global brand standards, in smaller units as well as large department stores. We can leverage buying efficiencies; to lower overall costs can also look at the time element of a fit-out; as even a week’s saving on a small store means an earlier return on investment. In some cases we are working in many countries – for instance we are global account managers for major organisations including Nokia and Royal Bank of Scotland.

We provide a full pre and post-contract project and commercial management service, for new land owners as well as experienced developers. Many clients ask us to help them verify their budgets in order to obtain funding and to calculate projected profits. We can also bring lease advisors on board.

Our understanding of the sector is demonstrated by solid benchmarking data which enables us to challenge and interrogate development plans, ensuring that our clients’ interests are protected and best value is achieved.