Retail giant may raise some rents despite slowdown

Majid Al Futtaim, the largest developer of shopping malls in the Middle East, may raise rents for some of its tenants this year despite a drop in consumer confidence across the region, a senior company official said on Tuesday.

“There are lots of cases where there is justification for rents to go up, absolutely,” said Shahram Shamsaee, senior vice president of the group’s shopping mall division.

Dubai retailers have called for lower rents amid lower consumer confidence, a drop in tourism and the opening of new malls such as Emaar’s The Dubai Mall, which bills itself as the largest mall in the world.

But Shamsaee said Majid Al Futtaim (MAF) tenants were suffering less than others and that the group will not be lowering rents at any of its developments.

The number of visitors to MAF’s malls in Dubai was only down by around two percent in the year to date but consumers are spending less than they used to, he admitted, without giving any figures.

Sales at the group’s Mall of the Emirates reached $2.1bn last year, making it the highest grossing mall in the world, he said.

UAE sales of consumer staples such as food, as well as revenue from cinemas and fast food outlets have been higher than in the corresponding period last year, while consumers are deferring purchases of luxury, big ticket items such as jewellery and watches.

MAF sales in Egypt and Oman were higher on the year, he added.

Occupancy cost in the group’s malls, or the ratio of retailers’ rent to total sales, was still low in Dubai by international standards, with the average retailer spending seven to eight percent of their revenue on rent, compared to 12 to 14 percent in developed markets, Shamsaee said.

“Even today, putting it mildly, they are very cash positive in this market,” he said.

He declined to give a figure for the revenue decline at the group’s Dubai malls, but said upscale malls had been worse affected than those who compete on price.

“If you have a mall that’s very much the basics, hypermarket anchored, what you call value orientated, the impact is less than a mall that’s got a lot of luxury jewellery and watches,” he said.

“I can tell you that sales in this market are still extremely high compared to the rest of the world,” said Shamsaee, who also sits on the board of trustees for the International Council of Shopping Centres (ICSC).

Majid Al Futtaim Shopping Malls operates nine shopping centres in the region with a total retail area of 700,000 square metres.

Out of these, four centres are in the UAE, two are in Egypt, two are in Oman and one is in Bahrain.

It currently has new projects underway in Lebanon, Egypt, Syria, Oman, Saudi Arabia and the UAE.

The group’s flagship developments include Mall of the Emirates, Deira City Centre and Bahrain City Centre.

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