The country’s food and beverage operators are getting some relief from falling rents as the softening economy eats into their bottom line.
There is downward pressure on the cost of units outside the main malls because the supply of retail space has increased.
The UAE economy has slowed over the past 20 months as the low oil price sparked redundancies and the subsequent negative consumer sentiment led to people cutting back on eating out.
However, the scale and scope of new developments across the country has fed the supply of retail units.
Landlords are willing to negotiate their rents to keep concepts in their buildings.
Dubai’s Glee Hospitality said rents charged for new outlets were 40 per cent lower compared with rates charged in 2014.
“We have seen some offers of free rent in new developments in Abu Dhabi. The smaller landlords across the country are realising that to allow a concept to leave means you have to attract another and negotiate a rent in a tight economy,” said Aboudi Saadi, the chief executive of Glee Hospitality.
Brokers acknowledge that landlords have become more flexible.
“I haven’t seen any substantial drops, but the pressure for smaller landlords is downward,” said Matt Green,the head of research and consulting at CBRE. “It’s very important for the smaller landlords to keep good tenants, so that balance is now swinging towards the tenant and there is a lot more flexibility in negotiation.”
“The big malls are still fully occupied and while F&B operators aren’t making what they did 18 months ago, they are still in a good location with decent returns,” Mr Green said.
Mr Saadi said that while the bigger landlords are still unwilling to negotiate, it is only a matter of time before they do, given that margins have become “wafer thin” for F&B operators.
The owners of Dubai’s biggest malls, Emaar Malls, Majid Al Futtaim and Nakheel, declined to comment on whether they were under pressure to reduce rents.
Revenues at the Jones the Grocer have dropped, but the Australian casual dining chain has found its landlords more than willing to renegotiate rents.
“In a slowdown you can only cut costs so far,” said Yunib Siddiqui, chief executive and owner of Jones the Grocer. “It is not good for the business environment or the country if landlords are unwavering.”
The company has opened two new franchised outlets in the past three weeks in Dubai airport and Mirdif. It has plans to officially open a store in Sharjah this week.
ascott@thenational.ae
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