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Wed 4 Feb 2009 10:01 AM

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Retail space oversupply 'set to force rents down'

New report says that leasing rates could fall in next two years as supply rises by 50%.

The potential oversupply of shopping mall retail space coupled with the global downturn could force Dubai leasing rates down, according to a new report.

Over the next two years retail space in Dubai is expected to increase by 50 percent to over 3 million sq m which may not be sustainable, particularly in today’s economic climate, a Better Homes review of commercial space in the emirate said on Wednesday.

The report also predicted that older malls in Dubai would have to refocus their target market as footfall would suffer as a result of competition from new malls and the downturn.

In January, Arabian Business reported that retailers in Dubai were blaming their high prices on soaring rents putting further pressure on tourist spending, which some say is down by as much as 50 percent compared with last year.

Dipesh Depala, co-owner of independent fashion brand Ayesha Depala in Jumeirah’s Village mall, said the rent currently paid by his firm is reasonable, but that “prohibitive” rents in other malls have curbed the company’s expansion plans.

“We pay considerably less than we would in one of the larger malls. I’m not sure why the rents are so high in other areas,” he said.

The chief executive of Saudi-based Jarir bookstores, one of the largest retailers in the Middle East, recently told Arabian Business that his company is avoiding the Dubai market due to the high cost of setting up a showroom here.

Between 70-80 percent of total retail GLA (gross leasable area) is accounted for by shopping malls while total spending in Dubai for the year ahead is expected to be between $7.5-8 billion, said the report.

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paul 10 years ago

Many of the shopping malls are owned by government backed developers. At this time it is important that they show leadership in order to preserve the businesses there. In return there should be an expectation that stores pass on savings to customers. Without such action, Dubai retail will be left high and dry, the cost of living will remain high, and the place will continue to suffer an exodus of people and businesses. The bottom line may be that stores are to blame for signing up to high rents and not seeing the coming downturn, it is not in the malls interests for all those stores to go bust and close down. They need to be pragmatic - if all those stores leave, they will be left with acres of empty space earning them nothing.

ahmed 10 years ago

hi time...

Mohad 10 years ago

If this is true and if rents fall to an excellent level for retailers, then the price of goods should come down to international competitive level. This would mean then Dubai gaining back its shopping destination title and go head on with shopping cities of the world like Bangkok, Kuala Lumpur, Singapore, Europe etc. MORE SALES NOW. This would in-turn help hospitality industry as they would have more tourists then flocking into the city. Provided they also have over supply rooms and all charge affordable rates. Don't forget, tour operators, guides, restaurants etc. This would mean more visitors for various tourist oriented locations such as global village, Dubailand, Wild Wadi, Museums etc. That would also mean aviation like Emirates, Fly Dubai and ports have more passenger traffic. To all the transportation infrastructure: More people to ride metro, ferries and busses Media & Design will grow as all the above needs marketing, branding and advertising. This is just a very tiny list of benefits. A simple price correction by every industry in Dubai to become absolute international competition could save Dubai economy in this recession and forever become a great TOURIST + ENTERTAINMENT + SHOPPING + HOLIDAY DESTINATION... it could be... Dubai – A Worth Holiday.

Ananth 10 years ago

The benefits Dubai will be acheiving on reducing the present high rent to atleast 505 less would be enormous.Shoppers and business houses would be inclined to reduce the cost of goods and retail prices would trigger a better customers spending.Dubai can become the best tourist destination for shopping,business,tourism,healthcare,entertainment et al.If the Dubai govt is serious of making the city the ultimate tourist destination then they should act now by calling the shots ,bringing legislation to reduce the rent drastically and making a conducive atmosphere for a free and fair business.

dxbgrl 10 years ago

You have said it very well. The inputs that go into a product consist of a lot of things beside rent. Cost of fabric is down, almost all commodities are down (except for Gold n Silver), transport costs hav come down etc. Only thing left is Mall Rent that needs to adjust itself. Once that starts happening, and prices charged by retailers come down to reasonable levels, we shall see Dubai asserting itself as one of the Shopping Destinations of the World. Already, hotels have adjusted their prices, enough taxis are available for the tourists, metro is about to come online (in a few months). MAIN thing left is retailers to bring down their prices. And we shall have the domino effect that MOHAD mentioned.

A 10 years ago

i truly agree with all the comments given above. if retail space/ housing rent is reduced and so is the price of all other commodities, Dubai will once again be on the world map and people like me who love Dubai will never have to think of leaving and going back. Please please do something and save Dubai. Put it back on the map and let us all proudly say that ' yes we love dubai and we want to buy property here and live here ever after".

Vinod 10 years ago

Many of the comments are truly noteworthy,I hope somebody who is the "Decision Maker" in the echlons of Power is reading their Residents comments/views/suggestions since most hv adopted Dubai as their 1 st or 2 nd homes,thus hv a personal interest in re-attaining the glory n favourite destination of travel status for UAE as a whole and not Dubai Only.

Capt.OD 10 years ago

The only thing which can save Dubai is the RENT.For last 30 years people coming to Dubai and contributing their services for its development and prosperity ,unfortunately they are forced ,either to send their family back or leave the country. They could not match there income with 100% increased rents and high prices.Last time when I was in Dubai, one of my friend packed up his buisness because, his landlord increased 110% rent for his shop.Perhaps we forget this fact that present Dubai is the gift of those 80% people ,who left their own country and came down here to support this city. How can we expect prosperity working with trobuled people.This rent-cap also could not support the people.The on only way to come out from present crisis is to bring down all the rents to the position of year 2002.