The fall of the mall?

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The Dubai Mall is sticking to its target of attracting 30 million visitors in its first year, but observers warn that the retail market could be nearing saturation.

After pushing back its opening date twice, the Dubai Mall threw open its doors to the public on Tuesday last week.

Out of the mega-mall's 1200 shops, more than 165 are opening in Dubai or the Middle East for the first time.

New brands will account for almost 30 percent of the 3.77 million sq ft of its total gross leasable area, with upscale French department store Galeries Lafayette and Bloomingdale's, its US equivalent, set to be two of its key anchors.

(Both are among the roughly 50 percent of tenants who have yet to open - Bloomingdale's isn't due to open until 2010.)

The continued influx of international brands into the region underscores the potential seen by western retailers in Gulf markets, and the mall is sticking to its forecast of 30 million visitors in its first year.

But despite a barrage of biggest, best and world's first, general manager Yousif Al-Ali ended up having to talk about the economy more than once during last week's media tour of the shopping centre. He remains upbeat on the industry's prospects.

"The business in Dubai is as usual. The growth in GDP will translate into more purchasing power in the region, even the tourism has not been affected - we are seeing a huge number of tourists coming to the region," he says.

The spending power of some of those tourists has fallen drastically as the dirham has strengthened. UK pounds will now get British tourists, who account for up to a third of the country's visitors, roughly 20 percent less than two months ago.

Add to that falling property values in their home country and sharp declines in the stock market.

Meanwhile, some expats in Dubai might be tightening their purse strings as a result of soaring housing costs in the emirate.

"The purchasing power of many sections of the population has at best been stagnant, but often declined, because of higher rental costs," says Eckart Woertz, economist at Gulf Research Center.

Obtaining a credit card has also become more difficult for some people in the wake of the credit crunch, he notes.

Concerns over potential job cuts at some of the international firms operating in the emirate could also deter people from splurging, according to Shuaa Capital retail analyst Laurent-Patrick Gally.

"They might be starting to be slightly worried about their jobs depending on which sector of the economy they work in, specifically if they work in the finance industry," he says.

"They may not be inclined to spend as much as they might have six months ago," he says.

International banks have flocked to Dubai in the last three years as part of efforts to strengthen their presence in emerging markets.

Redundancies could become a reality if growth in those markets slows, following spiking salary costs in the financial sector due to a dearth of job candidates with local experience.

"In any emerging market, when the big international investment banks see a slowdown, in activity, they scale down operations quite dramatically," Gally says.

Should expat spend be hit by wavering consumer confidence, it is discretionary products that are likely to be affected and not the staples, such as basic food ingredients.

"I think all high priced items that are not a necessity will suffer a little bit," Gally says.

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READERS' COMMENTS

Where is the big deal
Posted by Martin, Dubai, UAE on Sunday 16 November 2008 at 00:52 UAE time


I cannot imagine that the spending will increase it will just divert from other malls to the TDM. It is nice to have everything under one roof but why is the mall so difficult to reach by foot or public bus nd at the moment even by taxi. For some brands I wonder why they are so desperate to have a store in Dubai.

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