Dubai retail rents down 40%, vacancies rising - JLL

Jones Lang Lasalle report says estimated rental values fell 10% in last quarter alone.

Average retail rents in Dubai have fallen nearly 40 percent in the past year with vacancies across major malls increasing, Jones Lang Lasalle has said in a report.

It said that average estimated rental values (ERV) declined by about 39 percent to AED209 per sq ft since the second quarter of 2009.

The property consultancy added that ERVs fell by about 10 percent in the last quarter.

In its latest analysis of the Dubai retail market, Jones Lang Lasalle also said average vacancies across regional malls had increased to between 8-10 percent.

It added that expansion plans by retailers were either being "revised downwards or cancelled altogether".

The report said no new major mall supply was expected to be released until 2013 when the first phase of the Mall of Arabia in Dubailand is scheduled to open.

But it noted that sales revenues are expected to increase by around 3-5 percent this year, following a slump during the global economic downturn.

JLL said the rebound would be primarily driven by retail goods sold in department stores and mid market chains rather than luxury brands.

"Despite the slow growth projected in consumer spending, annual footfall in major super regional malls (such as Dubai Mall) is expected to rise in 2010, owing to tourist attractions and entertainment anchors within malls," JLL said.

"More enlightened centre managers are proactively engaging with tenants to offer more attractive and flexible terms," it added.

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Posted by: Raj

You raised a very good point Jakob. "And when it comes to the target demographics, well 1st choice is Emarati/GCC second are the westerners, period. " It is this thought that has forced professional Asians to buy online through Amazon or Macy's. Our family spend's close to AED12,000-15,000 a month on clothes, etc. Sadly the retailers conitnue to ignore us and thus surly not inviting our money. Not that it matters in this part of the world. God Bless!

Posted by: Paddy

Regarding references to crowds in supermarkets like Carrefour, it is only natural since people have to buy their monthly supplies. The fact is that supermarkets like Carrefour, Geant, Lulu etc are cheaper than your neighborhood store. This cannot be taken as a barometer to measure Dubai's current economic scenario. The discussion was originally about the retail scene - read high priced stores in glitzy malls. Since there's nothing else to do in Dubai, people flock to these malls, especially during summer when the outside temperatures reach high 40s. Unfortunately these so-called footfalls don't translate into sales since the prices of the articles being sold in these malls are beyond the reach of common man. And the intention of majority of the people who visit these malls is just to spend a few hours walking around the place. I have seen shopkeepers sitting idle in dozens of these shops while the corridors just outside the shops were bustling with activity. Whether you are an ardent fan of Dubai or a skeptic, the fact is that sales have fallen drastically in these shops. Just like the overall commercial activity in Dubai. To start with, things were priced sky-high and now what we are seeing is some sort of a correction, though quite a few shop-owners still living in Utopia refuse to accept the naked truth. Same is the case with residential rents. Apartments that were commanding rents of 90K and above in 2007 are now ready to be let out at 50-60K. This is in prime residential areas like Bur Dubai. People who used to insist on a single cheque for rent are now flexible enough to accept 4-6 cheques. Real estate agents who used to behave as if the whole buildings were owned by them are now turning mellow with quite a few of them accepting lower agency fees. Total number of cars sold in Dubai have shown a steady downward trend, while agencies selling used cars are reporting huge stocks. The traffic on the streets of Dubai are nowhere near the levels seen a couple of years ago. The rumours are that more than 10000 cars were abandoned in Dubai in 2009 alone. I have seen hundreds of these cars parked opposite to Mall of the Emirates (on a huge vacant piece of land). All these are clear pointers as to the economic hit that Dubai has taken. The sooner people realise that the cost of living in Dubai needs to be brought under control, the faster Dubai will recover. Dont expect to see another 2007 anytime in the near future, because that was not real. Lets all hope Dubai recovers on the economic front very soon, generates more jobs and continues to be the life support for millions of people around Asia and Europe who depend on this city / country for their livelihood.

Posted by: Mujeeb Ahmed

No doubt, Dubai is one of the expensive place, but a good place for the earning and work. Here we should be very careful at every step while shopping and spending on entertainment. It is not the situation, that one might say that it was dark in the night and I got looted.

Posted by: Jakob

I doubt either of you guys is in the retail business. MCC might be a great success when it comes to footfall, but it is certainly not a success when it comes to turnover/sales. Outlet Mall is a retail desaster and Dubai Mall just scrapped most of its gold and diamond shops. Even DCC is not performing as well. And when it comes to the target demographics, well 1st choice is Emarati/GCC second are the westerners, period. As long as you have no insight into the retail business, you can not assess the situation.

Posted by: Mohamad

Guys, Omar actually has some valid points; you can wait in a queue for an hour just to buy your grocery stuff from Carrefour. Again, rent did drop sharply in some places, but "unfortunately" some luxurious places are not hit that bad, I don't know about vacancies, but definitely prices are not hit as Dubai average did, reason could be that those owners are not in a rush for cash ?self financed?, or just pretending to be hoping they can save the "prestige" of the place and push prices back up soon. Traffic is a night mare at rush hours, but definitely better than it used to be a couple of years ago. People are leaving, some of them leaving their cars, their loans and credit card debts, situation is desperate in most sectors, people who get fired take months to find another job if ever, and by the time they do, it?s already too late to bring their financial situation back to normal, especially that new salaries are like 50% of what it used to be. Consider how much cost a family might incur during a 6-12 months period between jobs, we are talking a bout hundreds of thousands, considering rent, schools, car loans and personal loans if any, not to mention food, phone, and electricity/water bills. Banking, insurance, real estate, government sector and manufacturing sectors are suffering deep. Cash has shrunk, no more profits to get from stock markets, banks are not injecting cash in the economy because they lost a lot already, locally and internationally. Risks are huge now, banks can not afford to give personal loans, nor mortgages, because of the big redundancy issues and the declining real estate market, making it impossible to predict how much market value of the property would be in ten years from now not to mention the short term, so to be in the safe side banks must finance less than the 75% of market value as the conservative banks used to do, so you can imagine if I'm going to buy a 1m Dirham of property, having to pay over 250k as advance can make this transaction very difficult, especially after having to pay as little as 100k sometimes a couple of years ago. Some positive signs do exist though, first Nakheel starting to pay their local debtors "suppliers", this fact alone is very promising as Nakheel local debt is somewhat close to 7 billion, and it's real estate sector that is most hit by the crisis, so now we can hopefully expect that contractors, subcontractors, infra structure companies, banks, insurance companies, real estate agents, and their suppliers to have some what a kiss of life. Another good sign is in July, government sector which had its budget frozen for over six months, will have the green light to start spending, of course I don?t know how much is the cut for 2010 budget. Over all, it?s a very good time for anybody to be in Dubai ?with money?, if you are a salaried employee, you actually gain a lot on the deflation in real estate market and the somewhat relaxed traffic jam. I?m not in a situation to compare with Europe or other places, but friends in UK and the US do find the situation here very tempting, given they can lay down a good offer, keeping in mind the fact of ?No Tax? situation, and the tendency in the GCC to favor western educated people, or western passports. Last point, stay away of this country in summer, it is 47 degrees in the shade today. Cheers,

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