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It is known for creating landmark projects in Dubai such as the Palm Jumeirah, Deira Islands, The World and Jumeirah Lakes Towers, among others. Lately, Nakheel has turned its attention to retail development, which, a senior executive says, is part of a strategy to build a cash-generating asset base and reinforce the firm’s financial strength.
Nakheel has so far announced 11 large-scale retail projects and six smaller community retail centres, which it calls Nakheel Pavilions. The developer also owns and manages more than 1.35 million sq ft of retail space at Ibn Battuta Mall and Dragon Mart. The new projects announced will add more than 11 million sq ft of leasable space to its portfolio on completion.
“Retail developments form a significant proportion of Nakheel’s investment figure,” Omar Khoory, Director of Nakheel Retail, tells PW in an exclusive interview.
With the number and size of retail developments being undertaken in the emirate, oversupply is often cited as a potential growth inhibitor, but Khoory is confident demand will continue to rise in line with Dubai’s economic development plans. “I don’t believe there is or will be an oversupply,” he says, adding that Nakheel’s retail development agenda is driven primarily by strong demand.
With the number of options emerging in the emirate, Khoory explains that keeping shoppers happy will be a more important challenge. “We need to provide creative options for shoppers in order to be successful.”
The biggest projects in Nakheel’s portfolio are Deira Islands Mall, comprising 2.1 million sq ft and 500 outlets, and the two-phase extension of Ibn Battuta Mall, which will have a combined additional space of 1.44 million sq ft and 750 outlets. There is also ongoing work on Dragon City, a mixed-use community with retail and residential components, and will include 500 shops and 1.3 million sq ft of leasable retail space, complementing the ongoing expansion of Dragon Mart. Al Khail Avenue will have 1.25 million sq ft and 350 outlets; Nakheel Mall on the Palm Jumeirah will have 1.2 million sq ft and 350 outlets; and Deira Islands Night Souk will have 1.2 million sq ft of space with a whopping 5,300 small shops.
The developer is also integrating retail components into its popular community developments with the Nakheel Pavilions concept. “One key reason for our expansion is that we continue to enhance our communities with new facilities and services, including retail facilities,” he says.
Last month, Nakheel floated its latest construction tenders for Al Khail Mall, which is set to open in 2018 and announced high-end British supermarket chain Waitrose as the first anchor tenant for the development.
The developer is also adding new entertainment and retail destinations to the Palm Jumeirah. Nakheel Mall, located on the central trunk of the Palm Jumeirah, will include a 200-room fivestar hotel, about 500 serviced apartments and a 200-metrehigh observation deck offering panoramic sea views. It will also be connected to the Palm Jumeirah Monorail, and with it to the Dubai Tram.
Nakheel is also building The Pointe at the tip of the Palm Jumeirah, just across the bay from Atlantis The Palm, and Golden Mile on the western trunk of the island, where shop leasing started earlier this year.
The Deira Islands Night Souk, expected to open in 2017, will encompass about 5,300 shops along 1.9km of waterfront. The main retail destination on the 15.3-sq-km islands will be Deira Islands Mall, for which tenders were released in January.
“We see our new developments as a strategic positioning of the company for the future, as we want to add value to the shopping, dining and entertainment experience in Dubai,” says Khoory.
Nakheel is currently expanding its retail operation at a mind-boggling speed. Why the rush?
Dubai has developed into the number one shopping destination in the region, which is why we are expanding our retail offering within the emirate. We want to ensure expectations are met in terms of world-class shopping experiences — for visitors as well as for residents. The competitive pricing of many retail goods in Dubai, which is an effect of the taxfree environment we have here, further boosts demand for retail facilities.
In addition, some of our retail projects are an integral part of our community development programme.
How many retail projects are under development and what is the strategy for the next five years in terms of newopenings?
The new large-scale developments are Deira Islands Mall, The Pointe, Nakheel Mall, Golden Mile, The Circle Mall in Jumeirah Village Circle, Al Khail Avenue at Jumeirah Village Triangle, the extensions of Dragon Mart, Dragon City and Ibn Battuta Mall, the Night Souk at Deira Islands and Warsan Souk at Warsan Village. In addition, we are developing four Nakheel Pavilions, at International City, Al Furjan, Jumeirah Islands and Badrah. Pavilions at Discovery Gardens and Jumeirah Park opened last year.
What is the total size of the leasable area?
Currently, our retail developments span 11 million sq ft of leasable space.
What is Nakheel’s overall retail investment strategy and what is your expected turnover from this sector?
Retail developments form a significant proportion of Nakheel’s investments.
In terms of turnover, we are targeting Dh7.5 billion in annual recurrent income from retail and residential leasing in about three years from now.
Who will be the most important anchor tenants in the larger developments?
This depends on the type of development — each has a different nature and needs different anchor tenants, depending on location, concept and theme. For example, for one development Waitrose can be a good anchor, while for another a department store might be more suitable depending on the concept of the retail outlet. We have signed a number of wellknown brands for Nakheel Mall, including Waitrose and Vox Cinemas. We have also confirmed Waitrose for The Circle Mall at Jumeirah Village and sister supermarket chain Spinneys for The Golden Mile at Palm Jumeirah. Other exciting names will be announced shortly, when contracts are complete.
What does Nakheel envisage for the retail sector as Dubai moves towards the World Expo 2020?
While the Expo is certainly a driver for the retail sector, we see our new developments more as a strategic positioning of the company for the future as we want to add value to the shopping, dining and entertainment experience in Dubai. While the number of visitors to Dubai will certainly grow thanks to the Expo, it is not the only reason we are embarking on a retail expansion. One key reason for our expansion is that we continue to enhance our communities with new facilities and services, including retail facilities.
What would you see as the greatest challenges in your retail strategy?
One challenge is certainly to meet the high expectations of consumers as we need to provide more creative options for shoppers to be successful. Consumers visit malls for more than just shopping and are always awaiting new concepts for shopping malls and retail outlets, combined with entertainment facilities. Nakheel aims to meet—and exceed — these expectations. There will be announcements shortly in this regard.
Can you talk about your neighbourhood centres?
As a real estate master developer, we seek to integrate retail facilities in our housing developments to establish a community feeling for residents. This is done through our Nakheel Pavilions and can be seen very well in Jumeirah Park and Discovery Gardens, where our first two pavilions opened last year.
Are there concerns of a retail oversupply?
I don’t believe there is or will be an oversupply. As I said, the retail sector is continually expanding in Dubai, and people want to spend their money here.
We continue to receive a very good response to our new retail developments in terms of demand for leasing space. We also carry out extensive in-house market research to determine the demand for and feasibility of our retail projects.
What is Nakheel’s post- Expo retail strategy?
Our retail developments are not specifically linked to the Dubai Expo 2020, although all of our projects — retail, residential, tourism and leisure — are being developed in line with the government’s 2021 vision. We are expanding in the retail sector within Dubai because demand is strong.
Retail expansion is in line with our corporate strategy of developing a cash-generating asset base for Nakheel, contributing to our overall financial strength and creating a sustainable business in the long term.
Source: Arno Maierbrugger, Special to PW