UAE as a shopping haven

Box ParkBoxPark (pictured here) is one of Dubai’s popular retail and dining destinations.F&B offerings areexpected to account for 25-30 per cent of Dubai’s retail mix in the next five years l Image Credit: Arabian Eye

The UAE’s retail sector’s vulnerability to currency fluctuation in source countries notwithstanding, the country’s retail real estate segment has been growing fast and ranked among the world’s most competitive. In its Global Retail Destination Index 2016 report, UK consultancy Savills states: “Dubai is forecast to report the strongest growth in retail sales over the next five years of the seven global cities (New York, Dubai, Hong Kong, Singapore, Paris, Milan and London) examined, potentially challenging London’s West End’s current global position.”

Developers are mindful of changing realities and are now more attuned to the real estate demands of the retail sector. Top developers in particular are the ones that are constantly innovating and quickly addressing the demands of an increasingly varied mix of tenants.

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According to the Savills report, produced in partnership with The Retail Group, “Dubai Mall has ranked higher than London’s Regent Street, New York’s Fifth Avenue and the Champs-Elysees in Paris in terms of the overall quality of its retail facilities and amenities.”

Following the massive investments in retail in the past few years, David Godchaux, the CEO of Core, the UAE associate of Savills, claims Dubai is now perceived as a top global retail destination. “But this is only the tip of the iceberg as we now start seeing developers trying to improve the shopping experience not only for tourists, as in the past 15 years, but also for residents,” says Godchaux.

“This trend of moving away from the bigger-is-better approach to more user and resident-friendly retail developments, bringing a real city experience and European-style shopping similar to those found in London, Paris and Milan, is something that was much-awaited by the market and that we see finally happening,” he adds.

Cost-effective retail space
A recent report by Standard & Poor’s warns that “retailers and their landlords stand to be negatively affected by more cost-sensitive tourists this year” as the strengthening US dollar makes shopping in Dubai more expensive for most international visitors.

The sector, therefore, needs to look carefully at margins and revenue to maximise its appeal. Standard & Poor’s report further states, “Landlords’ revenues should be protected by a high proportion of base rent, which is subject to fixed annual increase. However, weaker retail sales in 2015-2016 should contractually translate into lower growth from turnover rents in 2016-2017, due to the indexation time lag. Shopping centre owners could also face tensions with retailers, such as those in luxury goods, jewellery or home furniture, which are most hurt by weakening demand.”

The long-term outlook, however, is positive. According to the Mastercard Global Destination Cities Index 2015, there were 14.3 million overnight visitors to Dubai last year, which commanded a total spend of $11.7 billion (Dh42.9 billion) or an average spend of $819 per visitor. This was some way behind New York’s average spend of $1,416. However, the number of overnight visitors to Dubai between this year and 2020 is expected to increase by 9.7 per cent.

According to the report, 88.4 per cent of retailers surveyed from different cities say Dubai has the best choice and quality of shops in the world. Dubai was top in shopper experience, which was assessed via location surveys focusing on responses related to ease of shopping, connectivity, service and directional signage, outperforming London, Paris, Singapore and Milan.

Focus on food
Dubai’s finely tuned luxury and fashion offering is now making room for a strong food and beverage (F&B) segment offer as well, with new research covering markets in Europe, South Africa and the UAE pointing to the fact that more than two-thirds of shoppers in the UAE choose where to shop based on F&B options.

“F&B accounts for 10-20 per cent of the retail mix in Dubai and it is expected to grow to around 25-30 per cent in the next five years, as it continues to play a disproportionately important role to shoppers in the UAE,” says Nick Maclean, Managing Director of CBRE Middle East. “The findings reveal that while the location is key, the retail mix and F&B facilities are also paramount – a crucial insight for developers of new, largescale shopping malls, who are placing an increased emphasis on creating a compelling F&B offering as a means to attract retailers and shoppers, and boost retail spend.”

Malls are, therefore, increasing real estate space to F&B. According to the CBRE report, ten years ago it’d have been typical to see F&B accounting for around 7 per cent of total floor space. No shopping centre allocated anywhere near as much space as was typically found in Asian markets, where shopping centres allocate an average 25 per cent of the gross leasable area to F&B.

Mall developers in Dubai constantly look for ways to upgrade their offers. Ahmed Galal Ismail, CEO of Majid Al Futtaim Ventures, says, “As people’s taste and appetite for F&B evolve, we’ve innovated our offerings to include more F&B options in our shopping malls.”

The CBRE report points to the continued relevance of food courts, even as new additions are making the offering more attractive to consumers. “A typical centre now has an enhanced food court complemented by standalone food outlets throughout. The dispersed nature of the food and beverage allows consumers to think over a purchase while indulging in a latte.”

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F&B has also emerged as a key distinction between malls and online retail. “At a time of increased levels of online retailing, a strong F&B offer delivers one final benefit,” according to the CBRE report.

“It can only be consumed in the physical world. The internet offers the chance to review, evaluate and even order your food, but it does not facilitate you eating the food via a laptop, smartphone or tablet.”

Source: Shalini Seth, Special to Property WeeklyPW


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