Call to slow march of the Dubai mall giants

Retail sales have dipped 25 per cent this year as shoppers hold back on spending.

DUBAI // Retail developers should reconsider or postpone plans for giant malls given the slowing economic climate, says the head of the Dubai Shopping Malls Group (DSMG). Majid al Ghurair, the DSMG chairman and the president of BurJuman shopping centre, said retail sales in Dubai had dipped 25 per cent so far this year from the same period last year as shoppers became more conservative. Sales began to rebound this month, but the magnitude of the impact of the economic crisis on the UAE was still unclear, he said, and massive projects should be re-evaluated and possibly delayed for five or six years. "Seeing the market, I don't think it's a smart move unless they know something I don't know," Mr al Ghurair said. Mall retail space in Dubai is set to grow to 2.8 million square metres of gross leaseable area by next year, according to a recent report by Jones Lang LaSalle, a property consultant. This is up from close to 2 million sq metres available at the end of last year, a 28 per cent jump from the year before. By next year, the total amount of space will have increased by 263 per cent since 2006, according to consultants Retail International. The biggest mall under construction is Mall of Arabia, which is scheduled to open in Dubailand at the end of next year. It includes about 929,000 sq metres of leaseable space and will be the biggest shopping centre in the world. Mirdif City Centre, at 183,400 sq metres of leasable space, is also being developed. In the past six months, at least three malls have opened in Dubai. This includes the 80,000 sq metre Arabian Center and the 36,000 sq metre Dubai Marina Mall. The emirate's largest new shopping centre is Dubai Mall, which is about the size of 50 football fields and home to the world's largest aquarium and an ice rink. Since it opened in November, about 800 of Dubai Mall's 1,200 stores have opened, with the majority of those remaining expected to open in the first half of this year, according to its general manager, Yousif al Ali. "The footfall figures are on track with our expectations and we expect it to increase in the coming months as more retail stores and leisure attractions come on line," he said. But Tania Teagco, the manager of United Colors of Benetton at the shopping centre, said traffic was trickling through her store and most customers were just looking. "Of the 15 people who came in today, maybe about five of them were buyers," she said. Despite the slowdown, Jones Lang LaSalle said in a report released last week that demand exceeded available retail space and many malls had waiting lists for available units. However, cancellations and delays were expected, the consultants said. Mr al Ghurair said retailers were rethinking their outlets in Dubai Mall and delaying them until the economic situation improved. "They are considering that 'maybe we need to delay it'. And they're going to the [management], saying 'We're not going to open now. Give us some time.'," he said. Emaar, the developer of Dubai Mall, said in a statement that if there were delays, they "could be the result of normal issues that arise with design and fitting out. We have been working closely with the retailers to solve any such issues and get them open as soon as possible". Mr al Ghurair said Dubai Mall, like any new shopping centre, would need at least a year to stabilise its business. "When you open a mall of a magnitude of Dubai Mall, you will need for this project to mature... but if the developer is not strong enough to continue developing that mall and add more retail they will have financial difficulty. They will have problems because the mall is huge and has a huge running cost." As well, the DSMG chairman said the double-digit annual sales growth that Dubai had enjoyed for the past five years was extraordinary. But, relying on this growth, many retailers expanded too quickly. "You're not just going to go and get any brand anywhere in the world and bring it to Dubai and its going to work. Or by opening stores in every shopping mall where any developer comes along," he said. "I think, it will not work any more." Malls targeting residential communities, such as Arabian Center in Mirdif, were likely to succeed because they catered to surrounding consumers' daily needs, he said. But retailers would have to adjust their strategies to stay competitive. Mall owners may have to close underperforming stores, and outlets should reduce stock and staff to cut costs. Merchandise should also be chosen carefully for the market, he added. "The last four or five years, the situation was so good," he said. "So a lot of developers, they thought the shopping mall business was very easy. [But] its not just that you bring an architect and he will design a shopping mall and it will work. It is very challenging, it's tough. And during the good times, everybody is going to do well. But we will see in the bad times who is going to survive." [e-mail]