Abu Dhabi and Dubai to have more mall space, but may not be good news to landlords, retailers

The new developments will bring total mall space in the two cities to 8 million square metres – the equivalent of more than 1,000 football pitches.
Above, the new extension to the Al Ghurair Mall in Deira. Antonie Robertson / The National
Above, the new extension to the Al Ghurair Mall in Deira. Antonie Robertson / The National

Mall space across Dubai and Abu Dhabi is set to increase significantly within five years, even as retailers come under pressure from the strong US dollar.

Total mall supply in the UAE is set to increase by 3.3 million square metres – a 66 per cent increase on today’s figures, according to a new report by the property broker Knight Frank.

The new developments will bring total mall space in the two cities to about 8 million square metres – the equivalent of more than 1,000 football pitches.

But that could raise concerns among some retailers already discounting goods heavily to attract shoppers.

“The decline of oil prices and a strengthened US dollar against many of the world currencies is affecting the overall spending of residents and tourists,” said Diaa Noufal, an associate partner for Middle East and North Africa research at Knight Frank and the author of the report.

The UAE already has one of the highest numbers of shops per capita in the world with 4.7 million square metres of shopping centres in Dubai and Abu Dhabi alone.

In Dubai, Knight Frank calculates that the total amount of mall space will grow by 66 per cent from about 3 million square metres to 5 million square metres by 2020 as huge new malls such as a slew of new regional shopping centres come to the market.

In Abu Dhabi, mall space is expected to increase 65 per cent from 2 million square metres this year to about 3.3 million square metres by 2020.

Knight Frank researchers calculated that nearly nine out of 10 (88 per cent) of the new shopping developments planned to be built in Dubai before 2025 will be in so-called “super regional” mega malls, which include an extension to Ibn Battuta Mall and a further extension to Mall of the Emirates. Presently, 52 per cent of mall space can be found in these huge centres such as Dubai Mall and Mall of the Emirates, both of which have recently expanded.

By contrast, the new malls planned for Abu Dhabi were slightly more modest, with super regional malls accounting for 36 per cent of upcoming supply and slightly smaller regional shopping centres – such as the planned Reem Mall on Reem Island and Al Maryah Central on Al Maryah Island – accounting for 44 per cent.

The news comes as shopping mall rents in the UAE come under pressure as the strong dollar and a glut of new developments force landlords to work harder to keep tenants.

Last month, rival broker JLL predicted that Dubai landlords would have to drop rents in the final quarter of the year and into next year to make up for sluggish retail sales.

Nevertheless, Knight Frank expects the mall market’s outlook to improve next year.

“Retail rents in Dubai have already fallen a bit, but we are being quite bullish in that we expect leasing rates to stabilise over the coming quarter and into next year,” said Mr Noufal.

“The lifting of Iranian sanctions and potentially a stabilisation of oil prices next year could well boost spending.”

lbarnard@thenational.ae

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Published: November 17, 2015 04:00 AM

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