Dubai retailers dismiss rent-free offer as rumour

Dubai retailers have dismissed reports that landlords are offering rent free months as rumours, claiming that the city’s malls continue to underestimate the severity of the consumer downturn.

Earlier this week, Better Homes’ director of commercial leasing, Porush Jhunjhunwala, told Emirates Business that virtually all mall owners in the city were offering tenants rent free periods of two to four months when renewing their contracts, in order to help offset falling revenue amid the economic slowdown.

"The old contract of a tenant may say AED100 ($27.2) per sq ft and the new one may be at AED125 per sq ft. That's what the contract says, but landlords may give a good rent-free period to the tenant, bringing down the rent to AED75 per sq ft," he said.

But retailers contacted by Arabian Business denied having been offered any discounts by their landlords, suggesting that very few, if any malls have been offering rebates to stores to help them stay afloat.

“I haven’t heard from anybody that they got a rent free period. I do not know whether it is true or whether it is a rumour,” said MohiDin BinHendi, president of BinHendi Enterprises, which owns and operates upmarket stores such as Hugo Boss and Brioni.

Dubai shop owners have been hit by a double whammy as a sharp fall in tourism and consumer spending coincided with vast amounts of retail space coming on stream.

New malls to open in Dubai since the international recession hit the emirate in October last year include Emaar’s The Dubai Mall and Dubai Marina Mall, and Landmark Group’s Oasis Center.

“Retailers have gone back to the landlords to negotiate their rents,” said Jean Michel Bolly, group retail director for Dubai Holding Group, which owns 34 midmarket apparel stores across the GCC.

“Only a few have responded, most of them are not willing to negotiate. When they do reply, they basically give us hope but no concrete solution.

“This approach is dangerous as retailers will start to consider not renewing their lease or simply prefer to cut their losses by closing the particular shore and absorb the loss.”

Retail rents in Dubai declined by 10 percent in the first quarter this year, which was the first drop in over a decade, according to research from CB Richard Ellis (CBRE).

High rents has been cited as the main reason for many products costing up to 50 percent more in Dubai than they do in other markets.

An independent boutique owner who declined to be named said that a few tenants in her mall had been given rent free periods “to avoid large areas becoming vacant”, but added that her shop had just received a rent increase.

“I find it hard to believe that malls are sympathetic to shop owners. I think they believe that the market situation is not as bad as the retailers describe it,” she said.

Retail Is Detail, a company launching Thai furniture store Index Living Mall in Dubai, bucked the trend and said rents in Dubai’s shopping centres were reasonable.

“I would say that retail rents in Dubai are very competitive,” said Sanveer Gill, director of operations and merchandising.

“We haven’t been offered rent free periods, but that is also because the Dubai Mall has been doing very, very well. The footfall traffic here is very high, so I wouldn’t foresee us getting any special deals or any free rent.”

He added that he could understand there was concern in the industry over declining sales.

Walid Hajj, the chief executive of Cravia, whose portfolio includes the Cinnabon coffee chain and restaurant Zaatar W Zeit, said in February that rents in The Dubai Mall were “ridiculously expensive”.

“Emaar is charging probably the highest rents in the world and that has to change,” he said.

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