High rents 'not to blame' for mall prices

High rents are not the reason for the rising cost of shopping in Dubai, the head of one of the city’s mall owners has said.

Mohammed Khammas, chief executive of Al Ahli Group, which owns the Dubai Outlet Mall, said rents in Dubai’s malls are largely on par with the US and Europe and that retailers are partly to blame for price tags that are up to 50 percent higher than in the West.

“They don’t exceed the rates that you would find in any metropolitan city in the States,” he said.

“There is a big range within the city. You have strip malls, like the ones on Jumeirah Beach Road. Our development is an outlet centre, which targets value retailers and value shoppers, so the rent there is considerably lower…but it’s still in line with rents for outlet centres in the States.”

Dubai retailers have claimed high rents in the city’s malls are stoking their prices.

In an article published on Friday, shop owners told Arabian Business that soaring rents were squeezing profits while tourist spend in many stores has been almost halved.

A confluence of factors is to blame for Dubai’s relatively high prices, including higher profit margins due to lower volumes than in bigger markets, Khammas said.

“You would need a certain volume to drop your profitability margin,” he said.

Retailers who hold up to 20 or 30 franchises may also have struggled to market their brands appropriately and to manage their inventories efficiently.

“You have to manage your stock, your inventories and your marketing campaigns according to the consumer base you have. I don’t think we have come to the stage where we are able to talk to our end user,” Khammas said.

“[Retailers] have kind of overwhelmed themselves and they’re not speaking to all of their customers at the same time. They’re trying to but they’re failing, because they need separate managements.”

Going forward, franchise holders will become better at this, he predicted.

Labour costs have also risen on the back of previously booming economies in emerging markets and new laws requiring medical insurance costs to be borne by the employer.

“The big retailers dictate the rents because the success of any mall depends on their presence,” Khammas said.

Elsewhere, retail rents have proved resilient to the economic slowdown.

CB Richard Ellis (CBRE), the world’s largest commercial real estate services company, said on Sunday that retail rents in London’s West End and in most other European capitals were unchanged on the year despite a slump in property prices.

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