Dubai's most popular malls race ahead

Most retailers negotiate rents based on a percentage of revenues and, given the strong performance among stores in the past year, both retailers and malls have benefited from robust sales. Jeffrey E Biteng / The NationalShow less

Rental rates in Dubai's three most popular malls have increased by as much as 20 per cent in the past six months as the gap widens between the best-performing shopping centres and the rest of the pack.

Mall of the Emirates, Deira City Centre and Dubai Mall have all hiked rents, according to analysts and retailers, as the shopping sector has flourished on the back of more tourists and an increased confidence among residents to spend.

Most retailers negotiate rents based on a percentage of revenues and, given the strong performance among stores in the past year, both retailers and malls have benefited from robust sales.

"It's a function of sales. The tourism has been huge and hotels have been full," said David Macadam, the head of retail at Jones Lang LaSalle in the Middle East, who estimates rents at Deira City Centre, Mall of the Emirates and Dubai Mall have increased 15 to 20 per cent in the past six months.

Retailers agreed the three malls were well ahead in terms of footfall and income from rents.

"These three malls have increased their rents," said Poonam Chauhan, the brand manager for Mumbai Se.

Ms Chauhan said she was looking at negotiating rents in other malls down by about 5 to 10 per cent.

"The other malls try their best to get visitors but I do not really think they have succeeded," she said.

Most retailers sign leases with malls that charge a combination of a base rental fee and a shared percentage of revenues if the sales break a certain level. Mr Macadam said due to the high level of retail sales in the past 12 months, the three malls in question had received higher rents and so increased the base rent. Other executives said many retailers had it written in their franchise contracts with international brands that they had to have a store in one or more of the three most popular malls.

"There are certain malls where you can negotiate down the rents as much as you want," said Ashish Panjabi, the chief operating officer of Jacky's Electronics. "But we really want to be where the business is."

Both Mall of the Emirates and Deira City Centre are owned by Majid Al Futtaim Properties. Dubai Mall, which is owned and run by Emaar, registered a record 54 million visitors last year. Both MAF and Emaar declined to comment.

Jones Lang LaSalle estimates retail rents in the overall sector in Dubai remained stable at Dh1,885 (US$513) per square metre in the first quarter of the year, while average rents at Emirates, Deira and Dubai Mall increased to nearly Dh5,000 per sq metre.