Additional retail space to create oversupply, lower rents in UAE

The size of the GCC's retail sector is expected to grow from $253.2 billion in 2018 to $308 billion in 2023.
Additional retail space to create oversupply, lower rents in UAE
According to the report, 5.2 million additional square metres of retail space is expected to come up between now and 2023.
By Bernd Debusmann Jr
Tue 23 Apr 2019 11:51 AM

An influx of additional retail space in the UAE may create an oversupply situation and drive down rents across the market, according to a new report from Alpen Capital.

According to the report, 5.2 million additional square metres of retail space is expected to come up between now and 2023.

“The retail market in the UAE…is currently facing an oversupply situation, which could lead to delays in completion of upcoming projects,” the report said.

“Growing vacancy rates in some of the major retail malls, competition between new malls for tenants, coupled with the emergency of new supply in both the countries may drive down rental rates across the market,” it added.

Additionally, the report found that changing consumer preferences and the proliferation of e-commerce platforms are rapidly changing the GCC’s retail landscape.

“Changing consumer preferences and the rising adoption of e-commerce platforms are transforming the region’s retail landscape,” said Krishna Dhanak, executive director at Alpen Capital. “Although challenges remain due to the current economic factors, we anticipate that the region will see growth over the next five years.”

Technology

Among the changes expected are an increased adoption of AI technology, as well as augmented and virtual reality, image recognition and computer vision technologies.

“The enhancement of technology could improve margins and customer centricity and enable better understanding of changing consumer preferences with the use of data analytics,” the report added.

Retailers are also expected to increasingly turn towards “omni-channel business models” to cope with the rising demand for retail through smartphones and other devices.

Overall, the size of the GCC’s retail sector is expected to grow from $253.2 billion in 2018 to $308 billion in 2023.

According to the report, growth in retail sales is expected to be driven by an increase in population and rise in GDP per capita, as well as an evolving tourism landscape across the region.

“The GCC retail industry has witnessed challenging times in recent years but the long-term fundamentals of the sector remain intact,” said Sameena Ahmad, the managing director of Alpen Capital Limited. “Alpen Capital anticipates an expanding population base, high GDP per capita and growing tourism in the region.”

“Economic recovery led by improving oil prices is expected to revive consumer confidence and improve discretionary spending,” Ahmad added.

Initiatives taken by the GCC governments to stimulate retail infrastructure projects and ease business and visa regulations.

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