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Sat 26 Apr 2014 10:35 AM

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Mall beginnings: Kareem Shamma

By far the largest shopping centre currently under development in Qatar, Doha Festival City is likely to become the country’s first true ‘destination mall’. Kareem Shamma, chief executive of the centre, says the retail market is hotting up nicely

Mall beginnings: Kareem Shamma

Driving around Doha, evidence of Qatar’s rampant redevelopment agenda is at every turn. From the myriad road works to an entire metro rail system, sports stadia and new residential and commercial towers under construction, it’s a city in full transformation mode as it hurtles towards 2022 and hosting the FIFA World Cup tournament.

About 15km north of downtown Doha and another sign of the capital’s burgeoning industries is literally rising from the desert on Al Shamal Road.

Identifiable currently by the Middle East’s biggest IKEA store, which opened last March, work on the remainder of the QR6bn ($1.6bn) Doha Festival City (DFC) project is now well under way.

When finished, it will be Doha’s biggest mall with a total gross leasable area (GLA) of 250,000sqm and the third of joint-venture partner Al Futtaim Group’s Festival City-branded destinations in the Middle East, after Dubai and Cairo. Comprising 550 outlets, it will feature a 15-screen cinema and an indoor-outdoor entertainment park, as well as the city’s first mall with an integrated hotel and conference centre.

“The sheer scale and size of the project by far outstrips anything else that’s being planned at the moment in Qatar and certainly one of the largest in the Middle East,” CEO of Doha Festival City Kareem Shamma tells Arabian Business.

Sitting in his office on the second storey of a modestly sized temporary office erected on the construction site, Shamma has reason to be pushing the mall’s advantages despite the fact that it’s still two years until the first shopper is expected to amble through the doors.

While Qatar currently has 13 operational commercial malls, according to local real estate consultancy Al Asmakh Real Estate Development Co (AREDC), this number is set to double by 2018 with another 13 mall projects creating a net leasable area as high as 1.72 million square metres. Of that total, four new and two existing malls, comprising 650,000sqm, are located on Al Shamal Road.

The impact will mean a growth in organised retail space within Qatar from 285 sqm for every 1,000 people to 900 sqm per 1,000 people. At present the region’s leading shopping hub, Dubai, offers 1,380sqm in retail space per 1000 residents, while in the US this figure is 1,030 sqm per 1,000 people.

AREDC says DFC is to occupy the greatest slice of the new mall pie at 20 percent of upcoming supply distribution. By comparison, the Mall of Qatar, which is set to open a year earlier, and is arguably the most high profile of Doha’s new mall developments, having  even been described as the “nation’s mall”, has a 160,000sqm planned GLA, or about 8 percent of that pie.

“In my opinion there will be an oversupply of mall space,” Shamma concedes. “That’s where you really have to differentiate yourself.

“We see a very healthy business case for this project. There’s a lot of competition, but I believe there is a significant influx of population into Doha, and into Qatar in general, and I think it becomes rather self-generating, rather like Dubai was in the early 2000s.

“It’s the same situation for Doha; we see it growing exponentially, actually, in the run up to not just the World Cup but [the Qatar 2030 Vision], that’s an important milestone in Qatar’s development.”

He says in terms of area, other planned malls occupy very small percentages of overall new shopping development. “So, we’re certainly a front runner in terms of leading the supply. What will differentiate [us], I think, is the quality of the offering,” he says.

As well as its size, Shamma believes DFC is the first “international-standard mall in Doha”, as it will include an integrated hotel like those featured adjacent to Dubai shopping landmarks such as Dubai Mall and Mall of the Emirates, which are each standout international shopping attractions.

An operator is yet to be announced for the DFC hotel – Shamma says it is close to signing with a well-known international brand - but he predicts the 645-room five-star hotel will serve a predominantly business market and attract plenty of ‘leisure destination’ business as well.

“I suppose it is surprising, but look, better late than never,” he says of the lack of a mall-hotel combination to date.

“There are a number of malls, but I believe they were locally conceived, designed, built and operated. All competition is healthy, but I believe that there’s room for an international standard of mall and I believe this is what we’re bringing to Doha.”

Shamma says he’s also bringing another first to the Middle East in the form of a 30,000sqm combined indoor and outdoor entertainment centre. He describes it as “amazing” and more of an active-adventure space with facilities such as an indoor ski slope, ‘rapid river’ and zip line.

“Even if you take away the mall, quite frankly, the entertainment that we’re planning for this is going to be quite unique – not just in Qatar but in the Middle East,” he says.

“There’s more of a focus on active sport-type entertainment than just another slot machine arcade or family entertainment centre. We’ve got a family entertainment centre, we’ve got cinemas, we’ve got all the traditional entertainment, but we’ve got a lot more than that – it’s a focus on getting people to be physically active and out and about and out in the fresh air.”

He says whether it will be run by an outside operator or in-house has yet to be decided, but he is keen to distinguish its indoor ski offering as vastly improved on Majid Al Futtaim’s Ski Dubai.

“Ski Dubai, that was whatever number of years ago that was, and there have been second, third, fourth-generation snow parks now, so we hope that we’re now a few generations further down the line than Ski Dubai and I think what we’re offering responds to current trends in the market and what people want,” he says.

Shamma says ideally it is hoped the mall, which has some provision for a mixed-use extension in the future, will eventually link up to the $36bn new Doha Metro rail project, meaning visitors could step off a plane at the new $15.5bn Hamad International Airport and take the metro straight to DFC. The metro project is in its first phase, which will see four lines built by 2019, while the airport is scheduled to open fully next month after several years of delays.

The connections will give DFC access to some of Qatar’s 1.3 million annual visitors, of which 1.09 million came from GCC countries in 2013, as well as Qatar’s two million-strong population – itself forecast to grow by as much as 15 percent this year.

“That’s the ideal scenario, where they can very, very quickly connect up and if they’ve made a hotel booking in our hotel they can get off at the airport, take the train and end up directly into the project,” Shamma says.

“That would be fantastic and that’s the ultimate goal. We are currently in discussions with Qatar Rail to see how best we can hook up to the planned rail network in Doha.”

Launched in 2011, DFC is owned and developed by BASREC – a four-way joint venture between Dubai-based Al Futtaim Real Estate Services, Qatar Islamic Bank, Aqar Real Estate Development & Investment and a private Qatari investor.

Shamma says the project, which was hailed at its launch by then-Al Futtaim Group Real Estate development director Greg Douglas as “the most advanced entertainment, retail and hospitality complex in the region”, is funded through a mix of equity and a QR3.7bn ($1.02bn) loan raised from a syndicate of eight Qatari banks.

Originally slated to open in 2014, the project team is now targeting a third-quarter 2016 completion date for the mall, with the hotel and convention centre to open two to three months later.

So far, a number of leading regional retail groups, including Azadea, Landmark, Alshaya and Apparel have committed to bringing their fashion and dining outlets to the mall.

In addition, already-announced retail tenants include Toys R Us, Marks & Spencer and Intersport.

Shamma says about 70 percent of the mall has been leased “in one form or another” via signed leases, heads of terms agreements or proposals. In March, VOX Cinemas was announced as the cinema complex operator and a deal with a major new-name department store is also being finalised.

With a reported first-year footfall of 1.4 million visitors and the launch of IKEA’s Qatar online shopping option last month, Shamma says the Swedish furniture giant, which in the Middle East is owned by Al Futtaim, has been very well received. “There was huge demand for IKEA, there was a gap in the market for what they offer and so it’s been very, very well taken in Qatar,” he says.

Based on recent numbers, the potential returns for DFC, at least, also look strong. AREDC says commercial rental rates have doubled since 2006 although occupancies remain stable in virtually all malls. In addition, DFC’s own research indicates its forecast target market of 560,000 residents will create 1.16 million mall trips per week - around 60 million every year.

“Malls with cinemas attract higher footfalls and sales than other malls,” AREDC says. “As per a 2011 statistical report, cinemas attracted around 1.6 million audiences. Hence, despite higher rental rates, occupancies are equally higher in malls with movie theatres.” Coupled with Qatar’s searing summer heat, where temperatures hit 45 degrees Celcius, the presence of a multiplex ensures “malls became one of the preferred family fun destinations”.

“Owing to new supply, yield on the mall investments could be impacted, however, with an increasing population, ...and higher per capita income would be expected to build optimistic future scenario for the retail segment,” it says.

Shamma is under no illusion about the challenge ahead. “The competition will be strong and we’re aware of that, we’re not taking it lightly,” he says. “But we feel we’ve got a compelling enough case for Doha Festival City to be the category killer and the mall of choice, the destination of choice.”

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