Demand for Dubai’s retail sector was strong
in 2014 driven by growth in spending, a relatively large demographic of young
affluent adults, increasing tourist demand, and growth in GDP. Has this
continued in 2015? We’ll see. But first let’s take a look at the year that
passed.
A
Look back on the Retail Real Estate Market in Dubai
Last year, Dubai Mall attracted a record 80
million visitors. Because of this influx of foot traffic, retailers experienced
14% growth in sales compared to 2013, which accounts for 5% of Dubai’s GDP.
Initial estimates show that retail sales are expected to have grown by 4.7% in
2014 up from AED 191.3 billion in 2013, despite rising Consumer Price
Inflation.
Activity in the retail market during 2014
showed a heightened focus on community retail and diversification of
traditional retail formats in Dubai, in response to higher expectations from
consumers coming from all over the world and greater demand for convenience for
the residents and expats. A number of high profile retail spots were launched
in 2014 at the following: The Beach at Jumeirah Beach Residence and City Walk
(Phase One) saw a number of new outlets open during the year, including brands
from outside of the GCC. Both of these locations are outdoor lifestyle
destinations offering a mix of retail, F&B, wellness and entertainment. There
were also announcements in the development of more community retail centres in
2014, two of which are Discovery Gardens and Jumeirah Park Pavillion.
A number of major prime malls also underwent
expansion to accommodate a waiting list of occupiers. This includes The Dubai
Mall and Mall of the Emirates, as well as other locations including Ibn Battuta
Mall and Dragon mart, following relative supply increase during 2014.
Also, two significant retail IPOs took
place in 2014 in Dubai. The first of these was Marka, the UAE’s first public
joint stock company focused on retail and hospitality investment, and secondly,
Emaar Malls Group. These listings mark a key change in retail market sentiment,
evidence by significant investor interest in the IPO and over subscription, following
a five year IPO lull since the onset of the global financial crisis and
political unrest in the region.
So
what will happen in 2015?
With consumers demanding more than just
shopping amenity from malls, retail environments have evolved to integrate
wellness, leisure, F&B and lifestyle to enhance the visitor experience and
appeal to wider demographics. This trend will continue in 2015 and will
differentiate further between prime and secondary malls.
Dubai’s status as a leading retail
destination globally is predicted to continue to drive demand from world
renowned retailers. Apple has announced that it will open a new regional store
in Dubai in 2015, which is expected to be their biggest outlet in the world.
There will be additional demand from leading retailers for flagship stores, who
have not yet debuted in Dubai.
Since there will be a significant rise in
disposable incomes expected for 2015, retail sales in Dubai will continue to
grow. Super prime malls will experience further growth in tourist numbers
whilst residents will drive demand for convenience retail and non-mall retail
concepts.
What
has happened in 2015 so far?
The retail market continues to be
constrained by the slowdown in spending due to the reduced government fervour
in the wake of the declining oil market, restricting overall growth levels. But
the first quarter saw Dubai’s retail market remain largely stable. Despite
recording strong annual growth levels, average retail rents registered no
quarterly increases as of late. Vacancy levels still remained at 8%. Not too
many retailers have debuted in Dubai.
The subdued nature of the retail market
comes as a result of the drop in the number of Russian tourists, while the declining
Euro due to the on-going crisis in Europe threatens to drop the number of
European visitors. Now, performance of the retail market is expected to remain stable,
albeit stagnant throughout 2015, following estimates of retail sales growth
figures.
However, spending proves to be livelier. According
to statistics issued by Visa, the total Visa card spend in the first 2 weeks of
Dubai’s Shopping Festival (DSF) 2015 increased 12% Y-o-Y to reach USD 54
million, raking in more money to shops and retailers. In terms of spending
growth patterns, restaurants witnessed the largest annual increase; 31%
compared to 2014 figures. Visitors from nearby GCC country Saudi Arabia emerged
as the top spenders, contributing USD 35 million to the UAE’s economy, and
representing a 29% Y-o-Y increase. Given the general stability in the sector,
these figures portray the significant impact the event has on Dubai’s retail
market.
SOURCE: Roots Land Real Estate
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