Rents at the UAE’s super-prime malls including Mall of the Emirates and The Dubai Mall have reached more than Dh6,000 per square metre as demand from retailers outstrips supply, according to industry sources.
That compares with about Dh4,800 per square metre on average for the same malls last year, according to information provided by retailers and analysts.
“The rates for malls other than super-prime vary from Dh1,600 to Dh5,000 [per sq metre] depending on the shop, the size and the turnover,” said David Macadam, the chief executive of the Middle East Council of Shopping Centres. “Rent is a function of sales achieved in each store. The more people who come through the doors and the more people who buy, the steeper the rent.”
The sector is expected to grow by more than 33 per cent by next year, according to a report last month by Ventures Middle East. An Oman Arab Bank report said retail sales in the UAE were expected to reach US$92 billion in 2017 from about $65bn this year.
In Dubai nearly 500,000 sq metres of new retail space will come on line by 2016, adding to the 2.9 million sq metres of space already available.
The largest malls – Emaar’s The Dubai Mall and Majid Al Futtaim’s Mall of the Emirates – have waiting lists for space. Emaar and Majid Al Futtaim did not respond to requests for comment.
AllSaints, a UK-based fashion brand with 120 shops in 10 countries, has circumvented the problem of mall space by partnering with Majid Al Futtaim’s retail division, with initial plans to open five shops.
“We have two phases planned and we are expecting to launch in Dubai the first [AllSaints] store, most likely in Mall of the Emirates, and at a later stage in The Dubai Mall,” said Rajiv Suri, the chief executive of Majid Al Futtaim Fashion. “We are also looking at Abu Dhabi in Yas Mall for a potential location. Our next step after that will be in Kuwait and Qatar. After that we will see how it goes, then investigate Egypt, Lebanon and further abroad.”
There is about 2.2 million sq metres of retail space in Abu Dhabi, according to JLL, with more than 400,000 sq metres expected to come to market by the end of the year, mainly at Yas Mall on Yas Island, which is scheduled to open in November.
Retailers said they expected high footfall if they were paying such premium rentss.
“The rents in Yas Mall are the same rents as The Dubai Mall. They are charging the same rent as the world’s busiest mall,” said Ehab Al Bakri, the chief operating officer of Alsa Lifestyle, which operates 15 brands from confectionery to cosmetics. “I asked the operators, ‘How many people do you expect?’ 50 million? OK, charge like The Dubai Mall. But if you are expecting 5 million, charge like Al Ghurair Mall. We run Yoko Moku, a Japanese gifting confectionery brand that needs sustainably good sales to meet that sort of rent. Luckily our average ticket price is $50 to $70, so it is possible, but not for all our brands.”
The Yas Mall operator, Aldar Properties, did not reply to requests for an interview. In July, Aldar said it had signed an agreement with the luxury brand retailer Chalhoub Group to create the region’s largest department store, taking up 200,000 sq ft of Yas Mall.
The mall is 95 per cent leased ahead of the opening scheduled to coincide with the Abu Dhabi Grand Prix weekend. Other retailers signed up to the Yas Mall include House of Fraser, Hamleys and Joe Fresh, a Canadian fashion brand.
“I would be very surprised if Yas Mall was charging as much as Dubai, as it is the preeminent destination in the region and has malls running at 98 to 100 per cent occupancy, with retailers queuing to get in,” said Matthew Green, the head of research for the property consultant CBRE. “Retailers will not pay those rates in Abu Dhabi for that space, in that mall, in that location.”
The Dubai Mall had 75 million visitors last year, a rise of 15 per cent, according to its operator, Emaar Malls Group, which reported a 25 per cent rise in net profit to Dh617m for the first half of this year. Smaller malls are also doing well. Nakheel’s Ibn Battuta Mall had a record 313,000 visitors during the recent four-day Eid Al Adha holiday – double the usual footfall.
“The International Council for Shopping Centres came up with a ranking of global trading and the Mall of the Emirates was the seventh-best performing mall in the world in terms of overall sales in 2013,” said Mr Macadam. “They turnover about $1,800 per sq metre per year – that is huge.” He said that with the average shop covering about 185 sq metres, that amounted to an average of $333,000 in gross annual sales.
However, the UAE’s smaller, more community-orientated malls have their advantages, he said.
“The Dubai Mall is not the only market in the UAE,” said Mr Al Bakri. “The Dubai Mall had a very low footfall and conversion ratio in summer against some of the smaller malls – in fact [the smaller malls] out performed The Dubai Mall by some way. The best-performing outlets for us [over the summer] were Ajman City Centre and Dalma Mall in [Abu Dhabi’s] Musaffah. Footfall against conversion does not always match. You have to be careful.”
Source: http://www.thenational.ae/business/retail/retail-space-at-uaes-top-malls-comes-at-premium-price
