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Sat 14 Nov 2009 04:00 AM

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Room to grow

Peter Walichnowski, chief executive of Majid Al Futtaim Properties, on why Dubai needs another shopping mall.

Room to grow
Room to grow
MAF’s latest destination mall in Dubai, Mirdif City Centre, is on track to open on March 16 next year.
Room to grow
In 2008, Mall of the Emirates became the highest grossing mall in the world. It averaged monthly footfall of two million, and was followed by Deira City Centre in second place, at 1.5 million.
Room to grow
In 2008, Mall of the Emirates became the highest grossing mall in the world. It averaged monthly footfall of two million, and was followed by Deira City Centre in second place, at 1.5 million.

Peter Walichnowski, chief executive of Majid Al Futtaim Properties, on why Dubai needs another shopping mall.

I t's been a tough year for Dubai's shopping malls. Just in time for the opening of  The Dubai Mall, the world's largest shopping mall by total area, the international economic slowdown reached the Gulf's shores.

Thousands of well-paid, high-spending expatriate workers across the city lost their jobs and left the country within a few months. Those who remained cut back on spending, fearful that their jobs would be next in line.

At the same time the UK, Dubai's largest tourist market, plunged into what has turned out to be its longest recession on record.

"It's challenging, just like in every industry," Peter Walichnowski, chief executive of the largest developer of shopping malls in the Middle East, says of the retail climate in what is currently the group's largest market.

Dubai retailers have reported sales declines of 20 to 25 percent this year. But Majid Al Futtaim (MAF) has done better than most, with footfall in its two flagship malls, Mall of the Emirates and Deira City Centre, unchanged from last year.

"We haven't seen a decline in the number of people visiting our shopping malls. What we have seen is the average person spending less," he says.

"The main reason for that is that the tourists, who were the biggest spenders in Dubai, have dropped off during 2009. But in terms of the footfall, it hasn't changed. It kind of goes against the grain of what people are saying about people in Dubai losing their jobs. We haven't seen it in our malls."

If last year's data is anything to go by, he could be right: In 2008, Mall of the Emirates became the city's most visited shopping centre and the highest grossing one in the world. It averaged monthly footfall of two million, which was followed by Deira City Centre in second place, at 1.5 million.

Dubai's third most popular mall, Nakheel's Ibn Battuta development, didn't even break the one million mark.

Of course, with a seemingly incessant stream of new entrants, market dynamics could change quickly. By next year, total gross leasable area (GLA) in Dubai will have increased by 263 percent since 2006, according to UK-based consultancy Retail International.

The Middle East Council of Shopping Centres (MECSC) estimates that Dubai will have the highest GLA per capita in the world by the end of next year. At the moment, it is believed to be on par with the US. Add to that a large number of low paid labourers whose spending power is limited, and who rarely frequent glitzy malls.

However, Walichnowski believes there is still room for what he calls "destinational" malls; commercial spaces that offer more than just shopping and that attract visitors from a wider catchment area than just the local neighbourhood.

"The story of Dubai is that there are dominant destination malls, such as Mall of the Emirates or Mirdif City Centre, that are offering a very large variety of interaction with customers. You've got retailing, you've got leisure and entertainment, you've got food and beverage, you've got community services," he says.

"These sort of destination malls are still going to be very popular, because in Dubai it's the number one thing to do for people who live here. Not necessarily to shop every week and to buy fashion, but just to go to the cinema or take the kids to Magic Planet or to have a meal. These destinational malls are the city centres of Dubai because of the weather here."

The company's latest project in Dubai, Mirdif City Centre, is on track to open on March 16 next year.

Unlike other high profile openings in the sector, such as Festival Centre and The Dubai Mall, there won't be a phased opening period where many outlets remain boarded up while retailers put the finishing touches on their stores. More than 90 percent of the mall's tenants are on schedule to open their stores on the first day of business.

"We are on schedule to have over 350 store fit-outs complete a month before the mall actually opens, along with the surrounding road network scheduled for completion early March," says Shahram Shamsaee, senior vice president of asset management.

Mirdif City Centre will be the group's first mall in the northeast corridor of Dubai.

Rival firms also see potential in the area: the chief executive of Retailcorp, the company formerly known as Nakheel Retail, has said that his company believes the area is underserved by retailers, and that launching a hypermarket on Nakheel's stalled Palm Deira project is a priority for the firm.

Recent mall openings indicate that non-retail attractions are an increasingly important feature of the industry. Mall of the Emirates has its ski slope and Ibn Battuta was designed around the travels of the renowned 14th century explorer. The Dubai Mall includes a SEGA indoor theme park, an ice rink, and an aquarium.

To that end, Mirdif City Centre will include a 25,000 sq m entertainment area, featuring iFLY Dubai, an indoor sky-diving centre; Soccer Circus, an interactive football attraction; and Aquaplay, a water-based recreation facility.

The mall will have a gross leasable area of 196,000 sq m, which will house 430 stores, which is almost three times more than Emaar's Dubai Marina Mall, the latest mall to open in the emirate, has. Some of the brands will be new to the region, while many of the anchors are familiar names, including Carrefour, Cinestar Cinemas, Debenhams, Emax, Centrepoint and Home Centre.

"I don't think that Dubai is saturated in terms of destinational attractions that make Dubai attractive for both locals and visitors. At Mirdif City Centre we are putting in a leisure offering that no one else has in the malls in Dubai. It's like an enclosed theme park almost," says Walichnowski.

"This is going to be very attractive to tourists because it's something new, exciting and different that they don't already have here.  We're not just replicating something that's here already and saying we're building more of the same."Still, when MAF unveiled a $4bn retail expansion plan earlier this month, none of the projects were in Dubai, indicating that perhaps even Dubai can use a breather when it comes to new mega-mall openings. The group is going to spend around $4bn over the next five years to double the amount of retail space it controls in the region, with a focus on the less mature markets of Egypt and the Levant.

In total, MAF is looking at more than 14 projects in UAE, Oman, Egypt, Lebanon, Syria, Qatar, Saudi Arabia and Yemen, as it increased its gross leasable space from approximately 750,000 sq m to over 2.2 million by 2015.

The company funds its projects with debt and equity, and some projects will be done as joint ventures where the local partner provides the land. It already controls land in Egypt, Beirut, Damascus, Oman and Qatar. The portfolio already includes nine shopping malls in Dubai, Bahrain, Oman and Egypt.

The Egyptian market has been particularly resilient during the recession. "Even during the recession our sales have gone up in Egypt. So it's a format that is very acceptable to Egyptians," Walichnowski says.

The Carrefour franchisee opened the French hypermarket giant's first branch in Iran last month, and part of the new plan is to bring it to Pakistan, where it also holds the rights to the brand. The group has opened 26 Carrefours in the region to date.

In Dubai, it is rolling out the Carrefour Express format in smaller malls and neighbourhood centres. Neighbourhood malls has been cited as a growth area by master developers Emaar and Nakheel, as Dubai's population has grown and the city's roads have become more congested.

"They're very relevant. I live in a neighbourhood, and you need a neighbourhood mall that has your supermarkets, a coffee shop, a pharmacy, and so on," he admits.

But it isn't a sector MAF will be entering.

"We believe our competitive advantage is doing the big destination malls. That has been our strategy since Mr Majid started the vision of the mall business in the Middle East," he says. "We have always had a strategy for Dubai to have a big destination mall in the three cornerstones of the City: Deira, which is the traditional town centre, then we did Mall of the Emirates in new Dubai, and now we are doing Mirdif in the north growth corridor. These have been planned for a long time. We have had the land for Mirdif for a long time; we didn't buy it three years ago."

Emaar and Dubai World may have ambitious plans for their retail operations, but it is MAF that has the upper hand as competition heats up, Walichnowski claims.

"They're at a disadvantage to us because we took the initiative in 1995 to do Deira City Centre, and we took the initiative in 2002 to do Mall of the Emirates. Nakheel do control a lot of land, obviously, but why haven't they built a destination mall? They control the land and they have had it for many years. So it is the market dynamics that they are responding to, in terms of where, when, how big, and what retailers are available."

The story so far: Majid Al Futtaim malls

DeiraCity Centre (Dubai)opened in 1995, making it one of the oldest malls in the city. In 2006 it underwent a AED250m ($68.1m) facelift that added over 45 new retail stores and a revamped food court with over 900 seats.

Mall of the Emirates (Dubai)opened in September 2005, and quickly became one of Dubai's biggest tourist attractions. In 2008 the 223,000 sq m centre became the highest grossing shopping mall in the world.

Sharjah City Centre (Sharjah)covers over 35,000 sq m of retail space and houses more than 100 international, regional, and local brands along the city's main thoroughfare, Al Wahda Street. The centre opened in September 2001 and averages more than 10 million visitors a year.

AjmanCity Centre( Ajman)is the largest shopping mall in Ajman. The centre originally opened in December 1998 with 46 stores but has since added a further 22 stores, and increased its total retail area to over 29,000 sq m. Oman

MuscatCity Centre (Muscat), the biggest mall in Oman, underwent a 16-month OR22.5m ($58.4m) expansion project in 2006. The GLA has almost doubled to 60,484 sq m. The Centre currently houses 144 retail outlets.

Qurum City Centre is MAF's second venture in Oman after the successful Muscat City Centre. The project stretches across a GLA of over 20,600 sq m and is home to over 75 retail outlets.

EgyptMaadiCity Centre (Cairo)opened in December 2002. It is located on the new extension to the ring road between Maadi and Nasr City and offers 29,097 sq m of retail space.

AlexandriaCity Centre (Alexandria)opened in January 2003 and is Alexandria's largest and most popular centre. It is located opposite to the Alexandria International Park, off the Desert Highway.

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