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Thu 28 Oct 2010 01:04 PM

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Fresh doubts cast on future of Dubai's Mall of Arabia

CEO of Gulf retail conglomerate doubtful on mega mall, warns of retail saturation in Dubai

Fresh doubts cast on future of Dubai's Mall of Arabia
Mall of Arabia.

The CEO of Gulf retail giant Landmark Group has raised questions over whether Dubai’s Mall of Arabia, billed as one of the largest shopping resort in the world, will go ahead.

The mall is part of the $5bn City of Arabia project being developed by the Ilyas and Mustafa Galadari Group in Dubailand. The centre was scheduled to open at the end of 2010.

 “I don’t think Mall of Arabia is coming along. I don’t know when that’s going to happen, if that’s going to happen,” Vipen Sethi, CEO of Landmark Group, told Arabian Business.

The company has a “big commitment” to Mall of Arabia in terms of store openings, said Sethi.

“There is very little work being done in Mall of Arabia. We go to the site and we drive past and nothing has happened there.”

UAE-based Landmark Group is one of the most influential retail chains in the Middle East. The company operates 900 stores in 14 countries, and claims a turnover of about $3.8bn.

Landmark on Wednesday announced it will invest $54m in opening 100 stores across the MENA region over three years.

Branded as ‘one of the world’s largest malls’, Mall of Arabia is expected to have a gross leasable area of four million square feet in phase 1, more than 1,000 retail outlets, a rooftop hotel and access to the dinosaur-themed Restless Planet theme park.

Like many Dubai real estate projects, the mega mall has been delayed in the wake of the emirate's property correction that has seen developers struggle to secure financing and complete projects.

On opening, Mall of Arabia will be competing for footfall with existing shopping centres such as Dubai Mall, which opened in November 2008, and Mall of the Emirates.

The Dubai market may struggle to accommodate another large mall, said Sethi.

 “There is a saturation of retail space here in Dubai.”

Ian Gladwin, CEO Middle East of real estate firm Cluttons, warned the design of Mall of Arabia may need to be scaled down in light of the fragile economic environment.

“I think [Mall of Arabia] will have to be re-addressed in terms of the feasibility of the numbers and the size of the development will have to be re-addressed,” he told Arabian Business.

“Key to that size of development coming into the market is demand and take-up, and then footfall. It cannot be clumsily dropped into the market without good research going forward.”

A retail report released in August by Mumbai-based Bharat Book Bureau research firm highlighted the fact that the amount of leasable retail space in Dubai had increased by 263 percent between 2006 and 2010.

A study by real estate consultants CB Richard Ellis (CBRE) found that retail rental rates in Dubai averaged around $679.60 per sq m per annum in the second quarter of the year, a drop of 56 percent on pre-crash rates.

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Expat 9 years ago

Another mall will be a benefit to the country. Competition is good for the end users. Maybe this could also squeeze down the mall rents a bit, so that we have some more unique stores, as individuals entrepreneurs may be tempted, instead of the standard boring brands you see everywhere.

I think what would be a success would be "Dubai's Green Mall" - built in accordance to the latest environmental codes and with a lot of greenery inside. Many people with children would love a place where they come in the summer months and have a feel of nature and their coffee!!!

Come on take up the challenge.

ametis 9 years ago

Me thinks that since Stores in Dubai Mall, Mall of Emirates, Festival City , Burjuman etc. are struggling with sales, would be a very brave man indeed that Builds the Mall Of Arabia.

MM 9 years ago

This mall will be mega successful if built with some stores targeting cheap shoppers. We've way too many branded shop malls but none for cheap shopping. Most of them are in old town with no proper parking or congested roads. We need something like Kuala Lumpur's Berjaya Times Square style mall.

Mohamed 9 years ago

Yes there is a saturation point, even for retail. I personally feel it. After 7 years in UAE, I went for Gitex for the first time this year and I found nothing new. There is nothing to buy, I have everything with satisfaction. Same for dress, shoes, jewelleries, watches, bags, toys, outdoor kits, games accrssories & cars. Fed up of buying new every year. Everything I bought 4 years before is still exciting and satisfied with. Moreover for Dubai, why do they need this much of malls if they cannot plan effectively to increase the resident and floating/visitng population. Countries plan ahead to meet their growing demands. There is a limit to create demands. The residents are going to mall just to kill time, mostly they would buy some food or grocery.

jon 9 years ago

It will be even more saturated once Nakheel has built 5 more malls as planned...

johnny smith 9 years ago

I believe Galadari Group is sensible not to move forward with building and finishing the Mall of Arabia. The project should be put on hold for another five years to ensure that we have both the capacity and the demand. Obviously there has been massive investment by Galadari however a wait and see strategy is best at this time. I believe that Landmark should be supportive with analysis of the retail markets in Dubai. To date we do not have anyone even from the big retailers who have a clear understanding of the effect of the downturn on retail and what is the strategy moving forward to avoid more retail groups going out of business.

James 9 years ago

I really am not too sure what Expat and MM are talking about. It will be good for the country. Are you joking!!!! The malls we have are not full with either people or tenants!!! There is no one living out there, not one would go there!! look at Mirdiff City Centre - empty for 6 days a week. Dubai has retail to cope with over 55million people. This mall my prediction will NEVER get built and should NEVER get built!!!

Bernard M.A. Doff 9 years ago

"Fresh doubts"? There can be no doubt whatsoever that Mall of Arabia will NOT be built. To build such a massive structure is a major undertaking, requiring huge capital, resources and skilled project management.

Just remember the construction of Dubai Mall. That was a hive of 24*7 activity for several years. Then drive by the Mall of Arabia/City of Arabia "building" site. It is a still-life portrait.

Original Joe 9 years ago

The Mall of Arabia will happen but probably not until 2014 or 2015. The mall will happen for a few reasons...
1. I&M Galadari have already spent a lot of money on infrastructure for both Mall of Arabia and City of Arabia. They cannot walk away from this.
2. Retailers want this mall to happen. What they don't want is to another mall that does no marketing, another mall with a poor selection of brands, another mall which charges ridiculous rates where making a profit is nearly impossible. We know the big retailer players like Landmark and Al Shaya receive favorable rates but the smaller retailers are usually left paying the much higher prices (eg: Dubai Mall!).
3. A comical comment from Cluttons saying another mall should not "clumsily drop in to the market" describes MAF's Mirdif City Centre which is MAF's first failure. Mall of Arabia will be more successful that Festival City, Mirdif City Centre, Ibn Battuta and any other future Nakheel malls...if Mall of Arabia does it right.

Jake 9 years ago

Retailers do not want this Mall to happen. You are right, saying that MCC is not the success it was hoped to be. Especially the big groups became very careful.

Look, Abu Dhabi has 3 major malls to fill, Al Ain 2 and Dubai has quite a lot vacancies in the exsting malls and at least 3 malls are planing extensions.. Ok we are not talking MOE or DCC but take Marina Mall for instance or a completly empty Sunset Mall on Jumeirah Beach Road.

And forget about targeting cheap shoppers, that is not Dubai style. We have Dragon Mart and Outlet Mall, thats as good as it will get.

We actually have a booking for MOA, but I would prefer if it won't happen before 2016. There is just no need for such a big Mall.