Dubai malls to hike retail rents 35% in 2011

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Landlords in Dubai malls have raised their rents for next year by as much as 35 percent, the head of one of the emirate’s largest retail conglomerates has said.

Leaseholders can expect a significant hike in shop rents following a pick-up in sales across the emirate, said Abdulla Al Gurg, group general manager of Easa Saleh Al Gurg Group, which operates brands such as Better Life, United Colours of Benetton and Unilever.

“Some of the major retailer asset owners have increased their rents to 35 percent for [2011],” he told Arabian Business. “It really just doesn’t make sense. What is the rationale behind it?”

Mall owners are “playing a monopoly role, by owning the majority of real estate in retail,” he said.

When asked about specific malls imposing rent hikes, Al Gurg said: “I’m not going to mention any names but they are quite obvious.”

Mall sales plummeted in Dubai during the financial crisis as tourist numbers fell. However, there has been a significant bounce back in retail sales since September, Al Gurg said.  

“The earlier stage of the year has really been very bad… [but] it has picked up in the last three months. We have really recovered the market for around 1.5 to 2 percent from the first half of the year,” he said.

An analyst for a commercial real estate consultancy in Dubai confirmed that mall rents are expected to increase by more than a third next year.

Emaar Malls Group and Majid Al Futtaim Properties, Dubai’s largest mall operators, were not available to comment.

The emirate remains an attractive location for retailers. A report by real estate consultancy CB Richard Ellis earlier this year found Dubai ranks second only to London in terms of the number of global retail brands with a presence in the city.

In a ranking of 294 of the world’s top retailers, more than half had a presence in Dubai, according to the report ‘How Global is the Business of Retail?’

 “Despite continued uncertainty for some retailers across the world, luxury brand retailers have remained active and were responsible for the most new store openings in the past year,” said Peter Gold, head of Europe, Middle East and Africa cross-border retail at CBRE.

The family-owned Easa Saleh Al Gurg Group spans 22 companies with interests including retail, real estate and industry. The conglomerate is predicting 12 percent growth next year, with significant growth expected from its retail arm.

 

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Posted by: JK

The construction industry worldwide (Dubai, China, US, etc) is firstly, too focused (3x too many) on upper class housing, they cannot understand the vast majority WANT uncomfortably simple places, cuz decisions are made by billionaires who dont understand common men. Next, there are too many malls and retail everywhere now...there simply isn't enough cash to buy all that junk. Next, the internet age makes retail uncompetitive. Crashes in construction follow all booms, once busy people are suddenly thrown out of work...whats needed is to build slower and wisely, a proper education system is essential so people don't have to rely on construction industry for an income, and the corresponding crash and retail/residential crunches will be milder, and the economy more diversified. The fix is simple, all university education budgets focusing on science needs to be tripled worldwide.

Posted by: JDRH

Malls usually charge a set rate for their interior space and then a half rate for exterior space owing to the fact that it is only usable here 6 mos of the year. The land for the balcony area must be purchased by the developer just like the land for the building so he needs to recoup this cost. Some landlords charge a higher interior rent and then give the exterior away....it all evens out in the end.

Regarding the high prices in the UAE stores...I used to compare Toys R Us prices in Canada to here and when I found the same exact toy in Canada was almost a quarter of the price there I did my shopping in Canada when I was home. For the clothes which are exorbitant here and the sizings which cater to the more diminutive female figure here, I buy almost everything online.....ebay is amazing and they ship to the UAE.... Even Bulgari, Chopard and all your better brands are available on ebay.

Finally, warranties are not great here.

Posted by: Kaz

Well the Malls want to flush the tenants out.. It will only be another nail in a lot of shops coffin. What a shame.

But Emaar is kind of doing the same in the Marina. In 5 years - shops on Marina Walk 1 and 2 have had outdoor space "free" of charge.

Marina Walk 1 (where original 6 towers are located) was well maintained - with flowers, trees and plants.

Marina Walk 2 (where Grosvenor House is) - was not maintained. The few planted palm trees are gone and no other greenery was planted. The was no street lights and no cleaning for 4 years.

Now Emaar wants to charge 100 dhs / sqf for outside space on Marina Walk 2 - and 125 dhs / sqf for Marina Walk 1. That will kill a lot of restaurants.

And suddenly ... Marina Walk 2 gets street lights fixed and they clean up the rails and re-paint the rails. (No green plants yet though)

I do agree a price have to be paid.. But 100/125 dhs / sqf with a 7 day payment notice without warning - is not very nice or fair.

Posted by: Mark

Whether they increase or decrease the rents is immaterial to me as this ongoing global economic crisis taught me to be prudent and thrifty. I buy what I need not what I want.

Posted by: Simon

You are doing Mark, what the majority should be doing. Cutting costs where you can. Its not easy. Its not particularly good for the economy...but I don't find the economy paying my Apartment Rent, Travel Costs, Food etc, etc. In these times we have to look inward first, stabilise our own financial well being...and protect it against a future downturn...by saving what we can.

As you quite rightly say and live by...Buy what you need NOT what you want. Product suppliers that are considered luxury will be worst hit...but then thats not what keeps the real economy going....

Posted by: Y nasib

People who buy designer goods always travel abroad. Why should anyone buy in the malls in Dubai when goods are cheaper in London and Paris. They should reduce rents instead of increasing them.

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