For the most relentless pace of retail development on the planet, one must surely look to the United Arab Emirates. The biggest of everything is built within this oil-rich oasis on the Arabian Gulf, and that applies to shopping schemes as well.
Dubai, the UAE’s maelstrom of construction, will soon be graced with the world’s largest mall, only for it to be usurped in 2010 by an even greater scheme. It is a development pipeline that few locations could sustain.
Then there is Abu Dhabi, the UAE’s seat of government and a fast-emerging market. Dubai’s less-glittery neighbour is on a steep upward trajectory as it welcomes the Western-style mall to its shores. Less developed than Dubai, its potential is huge.
Dubai
Dubai does not do modesty. The marketing slogan for developer Emaar’s Dubai Mall, due to open in September, is the proud assertion that “the world has a new centre”. That is quite a claim, but with 344,000m2 of gross leasable space, the Dubai development – described as the world’s largest mall – is twice the size of Bluewater. It will house luxury brands as well as more high street-style offerings, and even a sumptuous gold souk.
Fittingly, the Dubai Mall will sit alongside the Burj Dubai which, when complete, will be the world’s tallest building. But, amazingly, the mantle of world’s largest mall will be passed on in 2010. That is when developer Dubailand opens the first 400,000m2 phase of the Mall of Arabia, which will one day contain a staggering 929,000m2 of shopping space.
“Things happen very quickly in Dubai, and news can fast become yesterday’s news,” says DTZ director and UAE specialist Russell Banham.
Conservative estimates of the amount of space in the pipeline easily reach 900,000m2, much of which will be delivered before 2010. How can Dubai sustain this torrent of new shopping space?
Although the population is just 1.5m, Dubai is increasingly seen as a prime tourist destination, receiving 7m visitors in 2007. And the opening of a new international airport – the size of London’s Heathrow and Chicago’s O’Hare airports combined – is imminent.
While UK developers scramble around their banks to ensure they have the firepower to deliver their 10,000m2 schemes, the finance behind Dubai’s 30-40 times larger projects is on tap. Most developers are bankrolled by ultra-wealthy private individuals and by funds backed by a rapidly diversifying economy with huge oil reserves at its core.
“The scope of what can be achieved in Dubai is limited only by what developers can think up,” says Banham. “Oil now makes up less than 10% of the economy, as the economy has diversified into such sectors as tourism and banking and finance. Money is really not an issue.”
But Colliers International does predict that the market might experience a short-term oversupply by the close of 2009 as it absorbs the huge weight of retail stock dropped upon it. Gross leasable area per capita is due to increase to 2.35m2 in 2010, and the agency suggests that retail sales will have to grow at an annual rate of 35% to sustain present performance trends.
Just as the UAE enjoys its own pace of development, it also has its own quirky property market set-up. No federal property law governs foreign ownership of real estate across the UAE, but the law in individual emirates makes it difficult for foreign firms to take a controlling interest in business ventures.
For developers, this results in the market being very difficult to break into. A handful of local developers, including Emaar and Majid Al Futtaim, have a firm grip on construction opportunities. For occupiers, it means that brands are usually franchised out to local companies in order to enter the market. In many cases, the same developers that are building retail schemes also operate the franchises placed within them in what are, in effect, in-house deals. This leaves a less-than-transparent market where deal information is at a premium and developers closely control who knows what about which of their projects.
CB Richard Ellis’s UAE-based director Mark Morris Jones comments: “Local merchant families control retail brands and some of the organisations are larger than the retail chains themselves. It is not unrealistic for them to control 30 brands, as well as 1,200 retail units and a quarter of a million square feet of space.”
Although locally controlled, the market is a truly global one when it comes to the brand names on display in the emirate. For instance, Majid Al Futtaim’s Mall of the Emirates is anchored by Harvey Nichols, and its Festival City scheme contains European stalwarts IKEA and Marks & Spencer.
Dubai, an extremely Westernised enclave of the Middle East, enjoys a truly global retail sector. But the fact that the sector is closely controlled by local players means that the market operates on Dubai’s terms.
Abu Dhabi
Abu Dhabi must boast one of the world’s fastest-growing retail sectors. During the fourth quarter of 2007 alone, developers lifted the lid on $6.8bn worth of retail development.
Until recently, its shopping scene was dominated by the traditional souk, but that is now changing, with Western-style malls in vogue and developers in the midst of delivering gargantuan shopping havens.
“Dubai has a fabulous marketing machine,” says CBRE’s Morris Jones, “and now Abu Dhabi has made the decision that it will also enter the market, but without going head to head with Dubai. It wants to develop in its own way, for instance with the construction of its Guggenheim Museum.”
Morris Jones adds that Abu Dhabi has already come a long way: “In the 1960s there was almost subsistence living here. What has been achieved in the timescale is extraordinary.”
The sleek capital of the UAE is a business-minded city that does not share Dubai’s brashness, considering itself a more refined emirate. Since the death in 2004 of Sheik Zayed, architect of the UAE and ruler of Abu Dhabi, his successors have embarked on a programme of modernisation. Abu Dhabi’s new rulers clearly want to emulate the meteoric rise of Dubai’s shopping sector, even if not to quite the same volume.
“Abu Dhabi is as good a prospect as Dubai,” explains DTZ’s Banham. “Estimates say it has 100 years’ worth of oil reserves left, while Dubai has seven years’ worth. The retail market in Abu Dhabi is still in its infancy, and it will be fascinating to watch as it no doubt flourishes.”
Until 2001, there was little more than 100,000m2 of mall space in Abu Dhabi. Then, in 2005, the Abu Dhabi Mall and Marina Mall opened, beginning a short period of rapid change which meant that there was around 800,000m2 of mall space in the emirate by 2007.
Colliers International research reveals that mall space now accounts for 60% of total retail gross leasable area in Abu Dhabi.
The chief driver of the present development explosion is local company Aldar, which boasts ex-Stannifer boss Ronald Barrott as chief executive and former Grosvenor retail director John Bullough as chief operating officer.
The firm’s development programme is huge. Already under construction is Central Market, which will deliver 60,000m2 to the city’s central business district by 2009. Then comes Noor Al Ain, and the Benoy-designed Yas Island, a massive mixed-use complex that will contain nearly 298,000m2 GLA of retail space, alongside Abu Dhabi’s new Formula One race circuit, which will host its first Grand Prix next year. Nearby is an 11.5km stretch of waterfront being styled as Al Raha Beach, to be furnished with 139,000m2 of boardwalk-style shops.
As in Dubai, development is mainly the preserve of local firms. As well as Aldar, another major developer is Mubadala, which is involved in a rare joint venture with US-based John Buck Co, called Mubadala Buck. The venture is building a new financial centre for Abu Dhabi that will include around 19,000m2 of shopping space.
For retail chains the market has similar prospects to Dubai. The emirate’s GDP was $98.3bn in 2007, representing over 60% of the UAE’s total. The average spending power of an Abu Dhabi household is now $14,400, with a year-on-year population growth of 6.8%. Total spending in the sector is expected to reach $2bn by the end of 2009.
The emirate’s existing retail draw contains a strong showing of upmarket Western brands such as Gucci and Versace, as well as a distinctly mid-market draw for instance, the Marina Mall contains French hypermarket Carrefour and Swedish furniture giant IKEA.
With massive development prospects, a clear desire for coverage by global brands and a huge pot of money waiting to be invested into retail property, Abu Dhabi might look too advanced to be called an emerging market, but its retail sector has plenty of growing room.
Occupiers
l Dubai’s occupancy rates are 98-100% in destination shopping malls, with average occupancy rates at 90%
l Over 70% of space completing between 2008 and 2010 in Dubai is prelet
l Abu Dhabi has an average occupancy rate of 90%, and full occupancy in new-generation malls
l Dubai Properties recently signed high-end US brand Saks Fifth Avenue for The Walk in Jumeirah Beach Residence
l MAF’s Mirdif City Centre Mall in Dubai will be anchored by French hypermarket Carrefour
l French brand Galleries Lafayette and US food brand Dean & Deluca have signed for Emaar’s Dubai Mall
l Marina Mall in Abu Dhabi contains brands including Mercedes Benz, IKEA, Versace, Burberry and Gucci.
Source: Colliers International/EG Retail
Rents and investment
l Dubai’s prime retail rents are $1,200 per m2 pa on average and up to $1,800 per m2 in premium locations
l Abu Dhabi’s average annual mall rents are $9.50 per m2, and up to $1,500 per m2 in premium malls
l In the fourth quarter of 2007, prime investment yields for shopping centres in Abu Dhabi were around 7.8-8%.
Source: Colliers International/CB Richard Ellis
Who’s building what?
DUBAI
l Dubai Mall Emaar is to open the world’s largest mall in late 2008. It will have a gross leasable area of 350,000m2, with more than 1,200 outlets. It also contains the world’s largest indoor gold souk. It is forecast to receive 30m visitors in its first year
l Mall of Arabia When the first phase of Dubailand’s scheme opens in 2010, it will overtake the Dubai Mall as the world’s largest mall. Part of the 1.86m m2 City of Arabia development, the first phase will be 400,000m2, and the gross leasable area will eventually amount to 929,000m2
l The Walk at Jumeirah Beach Residence Due for completion this year, Dubai Properties’ 1.75km waterfront project will contain 350 outlets
l The Oasis Center The Landmark Group’s 60,000m2 mall is due to open this year
l Mirdif City Centre Mall The 176,500m2 scheme, being developed by Majid Al Futtaim, will contain 450 shops, anchored by French hypermarket Carrefour. It is due for completion in 2009
l Dubai Marina Mall Emaar’s mall will open in 2009 with 40,000m2 of net leasable space.
ABU DHABI
l Central Market Aldar’s mixed-use scheme includes three skyscrapers and 60,000m2 of retail. It is due to complete this year
l Yas Island Aldar is on site now with its 1,700ha island, which will house various attractions including a new Formula One racetrack and 298,000m2 of retail
l Al Raha Beach Also being developed by Aldar,
the 11.5km waterfront scheme will contain 139,000m2 of retail
l Noor Al Ain Aldar’s mixed-use scheme will have 158,000m2 of retail on the site of the Al Jimi mall
l Marina Mall phase three Due to complete this year and add 37,000m2 to the scheme. Owned by a consortium of local families.
