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Driven by the turnaround in the residential real estate market, rising employment, increased liquidity and a large influx of expats and tourists, the retail sector in Abu Dhabi is on track to deliver rapid growth. The much-anticipated opening of the 2.5-million-sq-ft Yas Mall last month has also provided a further upward momentum for the sector.
Yas Mall on Yas Island and Capital Mall in Mohammad Bin Zayed City delivered more than 400,000 sq m of retail gross leasable area this year. Recent announcements of new super regional malls such as Sowwah Central, Saadiyat Mall/The District and Reem Mall, along with the planned Marina Mall extension, will further increase Abu Dhabi's retail supply significantly by 2017-18, according to a report by JLL Middle East and North Africa.
''Developers in Abu Dhabi are creating unique shopping destinations to reduce the leakage of customers shopping in Dubai and abroad,'' says Andrew Williamson, Head of Retail at JLL. ''The retailers have performed well this year and have seen their bottom lines improve as the economy continues to grow.
''The growth in the past few months have, however, slowed due to the summer break and religious holidays.''
Along with investments in new developments to establish itself as a prime destination for entertainment and shopping, Abu Dhabi has also started to refurbish older shopping malls in the city centre.
''Abu Dhabi has approximately 778,000 sq m of new retail space in its development pipeline, placing it among the leading cities globally, according to CBRE's Global Shopping Development report,'' points out Mat Green, Head of Research and Consultancy — UAE at CBRE Middle East.
Mall rental rates
Rental growth is showing in prime retail destinations, driven by robust demand.
''While prime rents for existing malls in the capital are currently around Dh3,000 per square metre for standard in-line stores, some of the recent deals at Yas Mall have been completed at rates higher than this,'' says Green.
Supported by a strong infrastructure and rising purchasing power, Abu Dhabi is an attractive destination for international retailers.
''The market in Abu Dhabi can be divided into on-island and off-island, with the on-island locations typically achieving higher rates,'' says Williamson. ''We anticipate that rental rates will remain steady as the market absorbs the new supply.''
Overseas expansion has now become an essential component of the growth agenda of global retailers, with most looking beyond domestic borders. More and more international retailers are actively exploring various emerging markets, from the far corners of Asia-Pacific to the rich economies of the GCC.
''When it comes to the Middle East or GCC, one country that has long been in the vanguard of these retailers' expansion strategies is the UAE,'' says Green. ''The country remains extremely attractive to international retailers and is widely viewed as the perfect launch pad into the Middle East and African markets.
''Abu Dhabi, in many respects, remains an accessible test bed for new brands and retailers seeking Middle East exposure.''
Abu Dhabi's retail sector has undergone a massive transformation in the past few years. Along with traditional souqs, the market now features ultra-modern retail concepts, such as Yas Mall and The Galleria on Al Maryah Island. Last year's opening of The Galleria, in particular, brought a significant number of new luxury and food and beverage brands into the emirate for the first time.
Some of these prominent brands include Christian Louboutin, Jimmy Choo, Mulberry, Pinko and Ralph Lauren, points out Green.
''Clearly, these brands are looking to capitalise on a young population, high disposable income and strong market fundamentals that prevail in the emirate,'' says Green. ''Recent developments have also brought Abu Dhabi forward on the global retail map, positioning the capital as an independent global brand.''
The Aldar Properties developed Yas Mall has introduced many distinctive brands under one roof. The mall features 370 stores, 60 of which are international restaurants such as Abu Dhabi's first The Cheesecake Factory, Angelina Café, Pie Face and the world's biggest rollercoaster restaurant. It also houses the largest Debenhams store outside the UK.
Yas Mall also includes the UAE's first Lego Store, Joe Fresh, standalone Under Armour store and two-level Go Sports store, as well as Abu Dhabi's first Hamley's, Hollister, Brook Brothers and Géant Hypermarket.
Chalhoub Group will also launch a unique store concept at Yas Mall, which will open by the end of next year. It will be dedicated to three categories: children, beauty and handbags.
Gulf News earlier reported that iconic department store Macy's will open its first store outside the US at Abu Dhabi's Al Maryah Central in 2018, alongside the second Bloomingdale's outlet in the UAE. The Abu Dhabi presence of the iconic brands was confirmed following an agreement signed by Al Tayer Group and Gulf Related, the developer of the $1-billion (Dh3.67 billion) Al Maryah Central, which will create 2.3 million sq ft of new retail capacity in Abu Dhabi.
Macy's and Bloomingdale's will have anchor roles when they open.
As the capital makes targeted investments to strengthen the retail sector, experts are upbeat about its growth prospects.
''Abu Dhabi's retail sector continues to grow as developers find niches that have not been filled,'' says Williamson. ''With continued infrastructure development in Abu Dhabi and the growth of the economy and the tourism sectors, there will be a need for new large format retail, leisure and entertainment destinations.''
Green adds: ''Abu Dhabi's retail market will see the influx of significant new retail supply over the next three years, potentially outpacing Dubai. However, in terms of overall performance, Dubai will undoubtedly remain the UAE's shopping capital.''
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Source: Chiranti Sengupta, Features Writer, Property Weekly