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Oversupply concerns threaten older malls
The UAE's retail industry should brace itself for short-term oversupply in the market, trigged by the influx of mega shopping malls.
"Smaller and older malls are likely to experience sharp increases in vacancies, coupled with downward pressure on rental rates," Stuart Gissing, regional director of retail for Colliers International Middle East told Retail News.
Established complexes will be forced to review their viability and look at repositioning themselves to appeal to specific market segments, he said, in a bid to compete due to the massive increase in the supply of retail space.
Dubai's Mall of the Emirates - currently the largest shopping centre in the GCC at 223,000m² GLA - will be overshadowed by the 2010 launch of Phase 1 of Mall of Arabia at 400,000m² and the 2009 opening of the Dubai Mall, amounting to 344,000m² of GLA.
"The new generation of shopping malls in Dubai such as Mall of the Emirates and Dubai Festival City are expected to firmly entrench Dubai's dominance in the retail industry throughout the GCC," he said.
Gissing said new malls with strong tenant mixes should be able to maintain current absorption rates, but with reduced demand could experience a softening in rentals.
Colliers International's new report Dubai Real Estate Overview - Fourth Quarter stated that the emirate's population growth coupled with increased tourist flows should sustain and drive demand for all types of retail space in the next few years, but predominantly in larger, modern malls with high visitor attendances.
Abu Dhabi's leasable area is set to increase from 526,700m² at the end of 2006 to 1.4million m² by 2010, representing a 165% increase, Gissing revealed, triggered largely by openings including Marina Mall, Al Wahda Mall, Abu Dhabi Mall and Al Raha Mall.
"Colliers International Retail Services project that in order to support this volume of retail mall stock, an approximate annual retail spend of US $4,900 per capita will be required," he revealed.
"In 2000 there were no destination retail venues in Abu Dhabi, yet in the intervening period there has been a notable shift towards the provision of international standard shopping malls, doubling up as visitor destinations."
He predicted that Dubai's status as a regional and international shopping destination will prompt consolidated efforts by retailers to counter rivalry by introducing new retail formats blended into larger retail developments.
"Some of the best retail brands are experiencing their highest sales per square foot here, and thus more are coming," he added.
Forthcoming retail supply in Dubai alone includes Oasis Centre (60,000m²) and Dubai Marina Mall (77,000m²) next year, Mirdiff City (183,000m²) and Sports City (140,000m²) in 2009, and the scheduled opening of Festival City's expansion (58,000²) in 2010.
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