Dubai remains second retail market globally

18 May 2015

But risk of oversupply in the UAE if consumer base not expanded

Dubai remains the second most important retail market in the world with 55 per cent of international brands represented, according to US-based CBRE’s latest research.

It is second only to London, which hosts 57 per cent of brands.

But Dubai remained a target market with expanding retailers, seeing the fifth largest influx of brands with 45 retailers entering the market in 2014, according to the CBRE report.

Abu Dhabi saw the third largest influx of brands globally with 55 new retailers thanks to the opening of Aldar’s $600m, 1.2m square-metre Yas Mall.

The UAE attracts a high proportion of food & beverage retailers, with 38 per cent of new entrants in Dubai and 50 per cent in Abui Dhabi, compared to a global average of 16 per cent.

But these ventures are also the most likely to fail due to the highly competitive market.

“Dubai is ahead of the curve, as an already mature retail market, so luxury goods were less important due to the level of representation already,” says Nicholas Maclean, managing director of CBRE in the Middle East. “It also had very diverse countries of origin for new entrants. Only London is like this; there is a correlation between how Dubai works and how London works.”

As tourism numbers grow, by 8 per cent in 2014, as well as the UAE’s population, retailers will continue to see Dubai as an attractive market.

“Growth is linked to two elements; high consumption and spending locally and tourism,” says Hamad Buamim, president and CEO of the Dubai Chamber of Commerce & Industry. “The tourism and retail sectors support each other.”

Of Dubai’s AED16bn worth of sales in 2014, AED7bn of this was in airports. While Russian visitors numbers and spending have fallen by 3 per cent, the 25 per cent growth in the Chinese market has more than compensated.

Dubai is also witnessing a massive expansion of retail space, including local Majid al-Futtaim’s $500m expansion of Mall of the Emirates which is due to open in September, and Emaar’s expansion of Dubai Mall.

“There is a scarcity of high quality retail space,” says Ahmed Galal Ismail, CEO of Majid Al Futtaim Ventures. “Retailers won’t come if the right real estate is not available.”

Both location, quality and overpricing are issues. Due to this there is a considerable waiting list for retail space at Mall of the Emirates.

“We can’t build malls fast enough to sustain growth,” says Ismail. “We go into third party malls with brands such as Carrefour, so we depend on third party developers to feed growth.”

In the UAE, there are $9.5bn of retail projects under development, according to MEED Projects.

However, if supraregional malls such as Dubai Holding’s $1bn first phase of Mall of the World materialise, the UAE risks an oversupply of retail space.

“Are we stepping into danger with the amount of retail space coming online?” asks Maclean. “For office space vacancy is at 35 per cent but demand is growing. Success depends on quality and location. The oversupply issue depends on whether the 10m square feet in the pipeline is delivered, but the UAE would have to grow its customer base.”

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