Retail Sector Aids Growth in the Middle East

Donal O'Leary
Retail has been one of the fastest-growing sectors in the Middle East region for the last decade, remaining buoyant during global downturn and with plenty of scope for future activity.

As the Gulf Co-operation Council (GCC) region's second largest sector, retail makes a major contribution to economic diversification and development. The retail culture has evolved from traditional outlets to today’s large shopping malls, hypermarkets and supermarkets, with an influx of premium and luxury brands to the region. Increased populations, urbanisation, indigenous and expatriate wealth, strong household consumption and a growing tourism sector continue to provide ideal conditions for growth.

The UAE has led the way in this sector and the more mature markets like Dubai still have ample opportunity for neighbourhood malls and mini-malls. As the population grows further and new leisure attractions draw more tourists in, additional large-scale shopping is likely to develop. Abu Dhabi has traditionally lagged behind, with high spenders typically heading for Dubai for shopping trips, but this is now starting to change. Deerfields Town Square and The Galleria have opened in Abu Dhabi this year, with several more in the planning process, amounting to an estimated further one million square metres of retail space between 2013 and 2017 [1]. Saudi Arabia, Qatar and Kuwait are also buoyant.

The retail culture has evolved from traditional outlets to today’s large shopping malls, hypermarkets and supermarkets...

The arrival of international brands continues to drive diversity and intensify competition for space in the premier malls. This is no longer the place for bargains and the market therefore focuses on its luxury offer and lifestyle positioning. In a region where the climate can limit outdoor entertainment, visiting the mall has become a recreational activity.

The larger developments target broad lifestyle appeal, going beyond shopping to improve the total mall experience. They act as a social hub for families and friends, offering air-conditioned environments with food & beverage, cinemas, bowling etc. These leisure and entertainment offers are core drivers of retail footfall and have become more competitive and ambitious, with the more innovative 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 the introduction of new brands to the locality.

In this competitive arena, developers differentiate on scale, quality, accessibility and the introduction of new brands to the locality. Anchor stores are especially important for the major malls, as demonstrated by the recent arrival of House of Fraser and Bloomingdales in Abu Dhabi, an international first store for both companies. In more mature markets, a mall’s popularity decreases over time as new offers appear. Footfall lessens, tenant mix decreases and the mall typically slides into a secondary market position. We are now seeing a lot more refurbishments coming to market – in Dubai, for example – with owners often adding new leisure offers to revitalise their business proposition and recapture/retain their customers.

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. Clients often need very early estimates where only a piece of land exists, and we are able to provide these together with ideas for the building, infrastructure and car parking planning.

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.

We also work with tenants, managing enhancements to meet corporate global brand standards in smaller units, as well as large department stores. We leverage buying efficiencies to lower overall costs and also review fit-out timescales, as even a week’s saving on a small store brings an earlier return on investment. Increasingly, we support global clients in their multiple locations, including global brands like Nokia and RBS.

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 underpinned 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. Our track record includes a range of retail and mixed use developments throughout the region.

References

[1] Jones Lang LaSalle.

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