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Sun 18 Sep 2011 10:23 AM

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Dubai era of mega-malls is over for developers

Analysts say trend shifting to smaller shopping centres amid glut of retail space

Dubai era of mega-malls is over for developers
Retail accounts for 30 percent of gross domestic product in the emirate

Dubai’s saturated
retail market is unlikely to see any significant growth until at least 2014 as
the industry looks to absorb the existing oversupply of space, analysts have
said.

Developers in the
Gulf’s retail hub are likely to favour smaller, community-based malls over
larger shopping centres, with research by property exhibition Cityscape Global
showing no significant mall space was completed in the second quarter of 2011.

“Total supply is expected to reach 2.58 million sq m by the
end of 2011. This impressive number is not anticipated to increase until at
least 2014,” the report said.

Dubai is the second-most attractive emerging market for
retailers after China, in part because high disposable income, according to
management consulting firm AT Kearney. Retail accounts for 30 percent of gross
domestic product in the emirate, home to about 40 shopping malls, Standard
Chartered Bank estimates.

Mohi-Din BinHendi, president of retail conglomerate BinHendi
Enterprises, said the emirate had reached capacity in its ability to
accommodate mega-malls.

“I would say for the moment it needs a rest,” said BinHendi,
the recently appointed chairman of Dubai Chamber of Commerce and Industry’s
Retail Business Group.

“If you want a world standard mall like Dubai Mall and Mall
of the Emirates… one has to think can I build another one? I think they have
reached saturation point but I could be wrong as Dubai is very unpredictable.”

Nisreen Shocair, president of Virgin Megastore Middle East, which
recently opened its 14 store in the region, said brands risk diluting their
appeal by opening outlets in every new mall launch.

“What is next for Dubai? I think this is it for Virgin.
There is saturation as far as mall development. I hope that we won’t have
another mall development, we have enough,” she said.

“I see so many brands opening up in every mall that comes
up, that is vanity or the fear that if you don’t open up you are missing out on
some opportunity and ultimately you dilute the brand and it stops becoming
something special,” she added.

The quantity of retail space is also taking a toll on rents,
as mall landlords struggle to retain their tenants. The Middle East have lagged
a global recovery in retail rents across the world, Cushman & Wakefield
said earlier this month, with prime rents in the region either falling or
remaining static.

Cityscape said Dubai’s mall developers have instead begun to
focus on community-based shopping centres in a bid to broaden their customer
base.

Nakheel last month said it would press ahead with the
building of retail outlets at its Jumeirah Park and Discovery Gardens projects,
and may construct up to five community malls across Dubai.

The shift in focus towards midmarket malls may offer an opportunity
to fill a gap in Dubai’s high-end retail market, said Hannah Jeffery, of Cushman
& Wakefield in Dubai.

“Until recently there was a lack of focus on both the
community and budget retail sectors, serving the local work force and
population. Developers and investors have now realised there is a gap in the
market and are keen to explore and capitalise on these opportunities,” she
said.

For Dubai, the days of building more large-scale
multi-purpose, or ‘mega’ malls have passed, with a few likely to suffer
financially in this new environment, the Cityscape report found.

Cityscape suggested the focus of larger mall developers is
likely to shift away from Dubai and to other Gulf markets in the coming years.

“Markets in Oman, Kuwait and KSA are all proving to be
popular amongst retailers that would once have focused solely on the opening of
stores in the buoyant UAE,” the report said.

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Original Joe 8 years ago

When (not if!) Mall of Arabia is built on Emirates Road it will be fully leased if the mall's layout avoids "dead zones" unlike Dubai Mall. Dubai Mall has never been fully leased since day #1. There are many dead zones where customers never go. This mistake should be avoided in the future.

Retailers want more locations because they keep adding more international brands. They need to grow. Would they rather take a chance on a new mega mall or go into one of the slowly dying malls like Al-Ghurair, Wafi, Bur Juman, or Ibn Battuta?