Signs of saturation as UAE's retail market softens further

Knight Frank report says UAE shopping malls are expected to experience further competitive pressures from online rivals
Signs of saturation as UAE's retail market softens further
Dubai Mall [Credit: Bloomberg News]
By Staff writer
Sat 03 Jun 2017 10:36 AM

Consumer confidence in the UAE remained uncertain in 2016 resulting in the Dubai retail market experiencing further softening in the first quarter of 2017, according to a new report. 

Real estate consultancy Knight Frank said well-established malls with higher footfall in the UAE continue to maintain healthy occupancy rates but the delivery of additional retail supply is expected to put pressure on overall occupancy rates.

It added that UAE shopping malls are also expected to experience further competitive pressures from online rivals, as more consumers embrace e-shopping.

But Knight Frank’s long-term view remains optimistic as Dubai’s retail market is strongly supported by the hospitality sector.

Its report noted that the delivery of Dubai’s new theme park complexes along with the Opera District and other demand generators is expected to drive demand for the hospitality market, which will undoubtedly have a knock-on effect on the retail market.

Knight Frank said UAE retailers are now seeing modest single-digit growth in sales due to general macroeconomic conditions while there are signs of saturation as an additional 900,000 sq m of space will be delivered over the next couple of years.

The report said traditional retailers are facing competition from e-commerce leaders such as Amazon. E-commerce sales are expected to account for $1.5 billion of the Gulf’s high-end luxury segment within the next four years.

Knight Frank added that mall operators are more often offering promotions and price reductions to entice customers and maintain strong footfall to further enhance and build on the emirate’s strong position as a central shopping hub.

The report said: "It is our view that brick and mortar stores will continue to be essential given shopping centres in Dubai provide family entertainment in addition to shopping, however retailers may look to realign their real estate strategies to reduce operating costs and to invest further into online channels."

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