GCC wealth to see retail sector hit $240bn by 2015

Retail sector to flourish, buoyed by region’s high disposable income and tourism
GCC wealth to see retail sector hit $240bn by 2015
GCC retail sales will grow at a compound annual growth rate of 8.3% to 2015
By Claire Ferris-Lay
Wed 02 Nov 2011 03:05 PM

The GCC
retail industry is expected to reach $240.3bn by 2015 underpinned by high
disposable incomes and a steady flow of tourists, investment bank Alpen Capital
said in a new report.  

Retail
sales across the oil-rich Gulf will grow at a compound annual growth rate of
8.3 percent between 2010 and 2015, the company estimates in its GCC retail
report.

“While
the financial crisis slowed down the pace of growth, the GCC retail sector
continues its uptrend supported by fundamental drivers, including growth
affluence and disposable income, rise in tourism, and a large expatriate
population, favourable demographic factors, and large-scale infrastructure
development,” Mahboob Murshed, managing director at Alpen Capital, said in a
statement.

Middle
East duty free and travel retail sales are expected to increase 9.9 percent
year on year between 2010 and 2015 while luxury sales will grow by 8.5 percent,
the report said. 

The GCC
is fast becoming an attractive region for retailers due to its rising wealth,
strong tourism industry and a growing urbanised population. Retail in Dubai,
home to some of the region’s most lavish malls such as Dubai Mall and Mall of
the Emirates, accounts for 30 percent of gross domestic product in the emirate,
Standard Chartered Bank estimates.

The
number of high net worth individuals in the Middle East increased 10.4 percent
in 2010 from the previous year while their financial wealth grew 12.5 percent,
said Alpen. 

An
estimated 5.4 million sq m of new retail space was under development in 2010
with around 60 percent added to the current stockpile by 2013. Total occupied
gross leasable area (GLA) is forecast to reach 11.1 million sq m in 2011 and
14.6 million sq m in 2015.

 “Current
demand for high quality retail space remains strong in the GCC and new shopping
malls are likely to enjoy healthy absorption rates. The demand and supply
factor therefore seem to be in balance and we believe that supply of new gross
leasable area in the future will be sufficient to meet demand for the retail
space over the next five years,” said the report.

Increased
competition and a shortage of skill labour remain challenging and could force
retailers to consider product diversification, attractive pricing and
convenient location. Rents are expected to rise as the economic climate
improves. 

“Positioning
shopping malls as complete entertainment centres and not just as shopping
outlets have become imperative to maintain increasing footfalls,” said the
report.  

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