A glimpse on how retail surge engulfs GCC

A glimpse on how retail surge engulfs GCCImage Credit: Supplied

The unprecedented growth in Dubai's global profile as a hub for business, leisure and shopping is not only propelling the growth of the retail sector in the UAE, but also providing fresh impetus to other emerging retail markets in the GCC. While the UAE continues to remain a hotspot for major retail investment, which will be further boosted by $14.4 billion (Dh52.89 billion) worth of foreign direct investment for the World Expo 2020, the neighbouring GCC countries are expected to greatly benefit from the spillover effect.

The rising demand in the local markets due to changing profiles of residents, who are largely young professionals with high disposable incomes, is also propelling the growth of retail sectors in other GCC countries.

''The emerging markets of Kuwait, Saudi Arabia, Qatar, Oman and Bahrain have huge potential and they are expected to grow at a tremendous pace, while the UAE reaches maturity with limited scope for such huge expansion,'' says John Mibu, Research Director of Ventures Onsite, which recently released a report on the retail sector in conjunction with The Big 5 exhibition being held at the Dubai World Trade Centre.

Experts say they are seeing increased retail activity as GCC countries position themselves as destinations for major tourism events.

''Increasingly, visitors to The Big 5 are sourcing products for retail projects and we continue to develop our event to help take advantage of this exciting opportunity,'' says Andy White, Group Event Director of The Big 5.

According to the 2014 AT Kearney Global Retail Development Index (GRDI), GCC countries continue to show strength as a dynamic retail market. Furthermore, the UAE, Kuwait, Saudi Arabia, Oman and Jordan are among the top 25 in the annual ranking of 30 developing countries in terms of attractiveness for market entry.

Based on growth potential, Qatar has about eight to 12 malls in the pipeline, which is likely to add a huge amount of gross leasable area (GLA) by next year to its retail market. Kuwait has already climbed one spot up to eighth in this year's retail attractiveness index.

Saudi Arabia, which has the region's fastest-growing young population, is another rising market as it is gradually opening up its retail sector to private investment.

With a growing focus on tourism, Oman is yet another potential market for retailers to tap into an impending boom. Bahrain, through the Saudi-Bahrain causeway and an upcoming GCC rail network, is likely to benefit from the retail boom through its proximity to affluent regional markets.

''There is currently strong interest in retail projects across the region as investors try to tap the huge latent potential in the largely young population,'' says Mat Green, Head of Research and Consultancy — UAE at CBRE Middle East. ''We have already seen UAE developers branching out to other GCC markets, including Oman and Qatar.''

Green expects the trend to continue and grow, particularly in markets such as Saudi Arabia, which, despite having the largest population in the GCC, is still undeveloped in terms of international brand exposure.

He also credits the region's retail growth to government initiatives in diversifying their economies, particularly towards increasing tourism.

''This is perhaps most relevant in the UAE, but is also slowly starting to have a more noticeably impact in Oman and Qatar, two countries that also have eyes on expanding and improving their tourism offering by developing major entertainment and retail attractions,'' says Green.

It has been an exciting phase for the retail sector as a whole as many new projects were recently announced in the region. Some of the major developments on the horizon include Dubai's Mall of the World, an entertainment and hotel district with a $6.8-billion budget. The project will include the world's largest mall, spread across 8 million sq m.

Other shopping projects in the region include Place Vendome in Lusail, Qatar, which is under construction at an estimated value of $1.37 billion, the planned Al Diriyah Festival City to be constructed in Saudi Arabia at a cost of $1.6 billion and the planned Muscat Festival City Mall in Oman.

Also in the pipeline are Abu Dhabi's Sowwah Central on Al Maryah Island and The Reem Mall in Najmat on Reem Island, Phoenix Mall at the International City in Dubai and the Avenue Shopping Mall Expansion — Phase 4 in Kuwait.

UAE drives growth

With Dubai at the centre stage, the UAE is expected to drive the retail sector in the region with a projected growth of more than 33 per cent next year, according to AT Kearney's GRDI. The UAE has traditionally been a centre of attraction for major international retailers who view the country as the perfect launch pad in the Middle East and African markets.

''The key factors driving the growth of the UAE retail sector are high disposable incomes, retail real estate expansion and the continued construction of shopping malls and hypermarkets,'' says Mibu. ''A steady inflow of international retailers, coupled with population growth and the rising importance of fashion among consumers, has also led to steady growth for luxury retail.''

Mibu says the retail market in the UAE is forecast to continue its expansion with sales to grow by 8 per cent every year until 2017.

However, Dubai is the most mature and sophisticated of the retail markets in the region, primarily because of its openness to private investors. It is the second-most highly penetrated global market after the UK and has attracted 53 per cent of internationally recognised branded retailers.

''Dubai is growing and growing fast,'' says Niall McLoughlin, Senior Vice-President of Damac Properties. ''Thanks to its safe-haven status, attractive business and tourism climate, and proximity to more than a third of the world's population who are within a fourhour flight, it is no surprise the retail sector is growing.''

He says solid government backing, state-of-the-art infrastructure and transport networks, a booming tourism trade, two of the largest airports in the world and a taxfree business environment have placed Dubai as one of the most desirable destinations on earth.

Although Damac Properties is not developing mega retail projects, it has a number of retail opportunities in its master-plan developments in Dubai — Akoya by Damac and Akoya Oxygen.

''We have The Catwalk, The Retail Centre in Akoya by Damac, which will cover a total of 94,500 sq ft with upscale casual dining options, cafés and a host of fashion stores besides others. The main anchor tenant is Waitrose,'' says McLoughlin.

It has also announced an area within Akoya by Damac — The Drive Akoya.

''The 1.3kmretail strip will be the most expansive shopping district in Dubai with high-end food and beverage, retail shopping, serene locations to meet friends and a host of family entertainment offerings,'' says McLoughlin. ''The strip will house an outdoor ice-skating rink, cinema screen and interactive kids' play area.''

Ahmed Khalaf Al Marri, General Manager of Union Properties, says Dubai's retail industry is driven by the emirate's economic growth, young population, vibrant tourism and greater investment opportunities.

''Dubai is a unique destination where business and leisure come together,'' he says. ''Thus, there will be a huge boost to Dubai's retail and tourism sectors over the next few years.''

Impact on real estate

The retail boom has had a positive impact on the real estate industry as all major master developments are planned with one or even more shopping malls or retail areas. Industry experts say this helps to profile these developments in a better way and also makes shopping very much accessible to the majority of residents.

''Leading retailers from around the world are all clamouring to enter the GCC market, which has huge potential, and that's only good news for developers in the region,'' says White.

For example, Union Properties, which is focusing on community retail in Dubai Motor City, has started construction on the Ribbon, a retail development that will include up to 11 commercial units, one supermarket and 16 food and beverage units. It is expected to be completed by April.

''We have a number of developments designed for Motor City, including The Link, which will provide approximately 200,000 sq ft GLA for retail, and the redevelopment of the Auto Mall into approximately 450,000 sq ft GLA,'' says Al Marri. ''In addition, a retail area will be allocated to the new Vertx Towers project with approximately 650,000 sq ft GLA in Motor City.''

Nakheel, another major developer, says its retail expansion strategy covers large and smaller projects.

''We are planning to increase our retail offering with around 6.5 million sq ft of leasable area by creating new destination malls on the Palm Jumeirah, Deira Islands and Jumeirah Village,'' says Sanjay Manchanda, CEO of Nakheel. ''We are also undertaking major expansions to Dragon Mart and Ibn Battuta Mall.''

Nakheel has also opened the first two of six neighbourhood retail centres in various Dubai communities.

Solid foundation

The GCC has more than $22 billion worth of shopping mall projects at various stages of development, including projects that are under construction, being planned or designed, or at the tender stages, according to the Ventures Onsite projects database. The list is limited to stand-alone shopping centres and excludes retail spaces within mixed-use developments and projects on hold.

Green says mega developments announced in the UAE will certainly have a positive impact on the retail sector.

''For instance, projects such as the ambitious Dubai Canal development will house a 50,000-sq-m shopping mall and more than 450 restaurants,'' he says. ''Initiatives such as these are likely to attract significant attention from investors and further consolidate Dubai's position as a regional commercial and tourism hub.''

Al Marri further points out that retail growth is mainly driven by the performance of the real estate market. ''We cannot have a strong retail business without solid real estate development,'' he says.

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Source: Syed Ameen Kader, Special to Property Weekly

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