Exclusive: Dubai drawing up emirate’s first retail rents index, official says

Stakeholders warn index may have limited use unless it is extremely nuanced

Dubai Chamber of Commerce and Industry said it has begun to develop the emirate's first-ever index of retail rents, intended to give clarity to retailers, mall owners and other stakeholders on what can be charged. The index is set to be launched by the end of this year. Mona Al Marzooqi / The National
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The Dubai Chamber of Commerce and Industry is developing the first-ever index of retail rents in the emirate in an effort to improve transparency in the complex and opaque sector.

"Dubai's first retail index will serve as an important benchmarking tool enabling industry stakeholders to track performance and identify key market trends and challenges," Hamad Buamim, president and chief executive of Dubai Chamber, told The National via email. The index, which will provide an indication to the market of what rents to charge across different locations in Dubai, is expected to launch by the end of this year.

“We believe it is the right time to launch this initiative, given the rapid expansion of the market and Dubai’s growing appeal as a global retail destination."

This week, a report by consultancy CBRE ranked Dubai as the number one market for international retailer presence out of 122 cities, with 62 per cent of 334 global brands operating in the emirate.

Dubai is perceived as an attractive destination for international retailers because of its high per capita spend, fast-growing population and innovative approach to development. Occupancy rates at prime malls such as Dubai Mall and Mall of the Emirates are running at a healthy 95-98 per cent, the report added.

However, the market is currently oversupplied, with retail space set to grow by 50 per cent to 4.6 million square metres by 2021 – more than four times the gross leasable area of Dubai Mall. In addition, the industry is facing disruption and rising competition from the growth of e-commerce.

This has led to falling rents and rising vacancy rates, with many retailers securing rent-free periods from landlords willing to take a cut in their income rather than have empty units.

Dubai’s Real Estate Regulatory Authority publishes a residential rental index at least once a year to prevent landlords inflating rents. However, public data on retail rents is scarce in the UAE, as deals between retailers and landlords are typically the result of complex negotiations that take into account everything from hard facts such as store location, size and turnover, to softer considerations such as brand worth and global profile, according to analysts.


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The retail index is one proposal from the Retail Business Group, an industry lobby group set up by Dubai Chamber in March.

"Retailers want their businesses to prosper and a retail index…would allow people to make sure they are paying fair rent for the facilities they are getting in various locations," Sanjay Manchanda, chief executive of Dubai developer Nakheel told The National that month.

The chamber is consulting with industry stakeholders on what the index should include. “We envisage this initiative will bring benefits to retailers, mall operators, wholesalers, distributors and investors, as it will provide much-needed clarity and enhance transparency, enabling companies to enhance their competitiveness and make more informed decisions,” Mr Buamim said.

But stakeholders warned the index may have limited use unless it is very nuanced. “Retailing is a very specialist art,” said CBRE Middle East’s managing director Nick Maclean.

“Judging the value of Unit A compared to Unit B in the same mall is difficult because that location could be more valuable to one occupier than another," he said. In the future the way units and locations are analysed will become far more intricate, he added.

Ghaith Shocair, chief executive of Shopping Malls at Majid Al Futtaim Properties said “any kind of visibility in the market is a good thing”. But rents are often based on trading zones within malls, and a one-size-fits-all approach is not be helpful.

“We’ve given our feedback to the government and made clear that an absolute index is really not the way to go because the business is far more nuanced than that,” he said. The rise of experiential and omnichannel retailing – where units are used as show-rooming opportunities rather than for sales, complicates things further.

“The index will provide a parameter for rents, but unless it is enforced, it’s unclear how much impact it will have over actual negotiations for prime locations, which set the rest of the market,” said Greig Fowler, chief executive of AW Rostamani Lifestyle, which manages brands including Georg Jensen.

“Landlords are more realistic about where the market is – they’re giving rent-free periods and cash towards fit-outs, unheard of years ago – so we’re seeing more of a partnership-driven model [when it comes to costs].”