Supply
- Dubai holds nearly 49% of the total retail stock in the UAE, followed by Abu Dhabi at 36%.
- With a market size of about 3.2 million sqm (GLA), over 87% of the total stock is managed by the top 5 developers; Emaar, Nakheel, Majid Al Futtaim, Al-Futtaim and Meraas.
- Occupancy levels across top-performing malls are northwards of 95%, particularly more for the malls established in the last decade.
- Interestingly, Dubai has a mall density nearly 380% higher than that of London and 240% of Paris, although these European markets have a stronger high street market in addition to a much higher population base.
- That said, Dubai is also positioned higher than other Asian markets which have a significant mall stock such as Hong Kong (by 113%) and Singapore (by 56%). Such high mall density is largely justified by Dubai’s very high visitor-to-tourist ratio of nearly 5.6 visitors per resident – the highest amongst all global retail destinations.
- Retail rents marked an uptick post the recovery from the global financial crisis and have now been almost flat for the last two years, indicating that the market is close to the top of its cycle.
- The delivery of new retail stock has been driven by past positive indicators of growth and 2016 saw many prominent offerings coming to the market that was largely initiated during the revival of 2011-2013.
- Notable new entries to the market in 2016 were Meraas’ Phase 2 of the Avenue in City Walk and Outlet Village in Jebel Ali, Nakheel’s Dragon Mart 2 and Ibn Battuta Phase 1 extension, Club Vista Mare on Palm Jumeirah and Al Futtaim’s Festival City Expansion.
- Furthermore, a few community retail centres also entered the market such as the International City Pavilion, Al Furjan Pavilion and The Ribbon in Motor City.
- Strengthening its retail domain with arts and culture, the high point in Dubai’s tourism calendar in 2016 was the opening of Dubai Opera situated in Downtown. It expands Dubai’s leisure offerings and adds value to the F&B and retail outlets of the Downtown district in addition to feeding traffic to and from The Dubai Mall.
Demand
- The retail market in Dubai is seasonal, peaking at the Dubai Shopping Festival while witnessing a drop in footfalls in summer.
- The recently concluded Dubai Shopping Festival marked its 22nd year in 2017. It strategically started earlier than usual this year to coincide with the festive and holiday season and the winter vacation for schools, leading to more business for retailers. It remains a key indicator of the for-Dubai's retail and tourism performance.
- On average, Dubai has an influx of 10% of its original population each day and is the third most visited city in the world with over 15.3 million international overnight visitors with a spending of $2,050 per overnight visitor - the highest in the world.
- This robust demand from tourism along with a cosmopolitan captive consumer base makes Dubai among the most preferred destination for international
retailers and by far the deepest penetrated market in the region.
- Despite the softening regional economic conditions, demand from retailers has not seen a significant dip with stable preleasing activity witnessed in The Dubai Mall expansion and other strategically located under-construction malls nearing completion.
Investing in Retail
- The retail market in Dubai has not yet emerged as a thought-after investment target from institutional and private investors alike due to the high level of control from the leading retail groups and developers.
- Factors such as high footfalls, near full occupancy levels, premium tenants and relatively much lower risk than other emerging markets are expected to translate into stable yields reflecting Dubai’s leading role on the global retail stage.
- In the last year alone there have been many e-commerce portal launches, diversifying the retail platforms in the region while looking to tap a wider audience.
- Although trust remains an issue, buying sentiments are changing as access to a much larger inventory of products offered with cash on delivery, which remains the major way online sales are conducted in the region, becomes available.
