DUBAI // Regional holding companies are increasingly turning to retail as a means of diversifying their portfolios and capitalising on the second-most prosperous non-oil sector after the property market. Dubai Properties Group (DPG), a division of Dubai Holding, is the latest to announce such an initiative with the launch of Dubai Retail. The company said its new subsidiary would consolidate its current retail operations and help develop the emirate's retail sector by constructing shopping malls and retail markets at key locations, including The Walk at the Jumeirah Beach Residence.
"We look forward to hosting and servicing both regional and international retailers as well as major hospitality brands at our facilities around Dubai," said Haiyan Mujarkech, the chief executive of Dubai Retail. "We have a talent pool that leads in industry expertise and market knowledge. That will prove to be the key determinant in our success." Last year, Dubai International Capital, the international investment arm of Dubai Holding, announced the acquisition of a significant stake in Rivoli Group, which has a diverse portfolio of high-end international brands including Dunhill, Omega, Cartier and Montblanc. The company said that the investment would support the retail group's regional expansion drive.
Similarly, Kuwait's Al Mazaya Holding announced its first retail endeavour yesterday - a shopping centre near Kuwait City that will focus on selling building supplies. Al Mazaya's Seven Zones Design Centre, due for completion by late this year, is being built with the region's booming construction industry in mind, offering more than 22,000 square metres of retail space. With Dubai property prices predicted to fall by as much as 10 per cent by 2010, according to the latest research by Morgan Stanley, many developers and investment companies are turning to the retail sector as a hedge against inflation and market instabilities. However, according to Naeem Ghafoor, the chief executive of Skyline Retail Services Consultancy, retail investments by many regional firms may have been too hasty.
"If that retail arm is to acquire retailers and open stores, then I don't see any sense in that," said Mr Ghafoor. "If it is indeed to acquire land, build specific retail developments and then have a division in the company to sublease them, then there is a lot of value in that." Another ambitious retail project was announced in June by RAK Holding, based in Ras al Khaimah, which unveiled plans to open its own grocery chain that would have stores within 500 metres of nearly every home in the UAE. Officials with the company say the chain, called Near Buy, will represent an investment of Dh100 million (US$27.2m).
"It's a mixed up strategy," said Mr Ghafoor. "They probably think that retail has fantastic margins, so they invest and then they think about the consequences later. They see Dubai growing and malls growing, so people think 'we should be doing the same thing'." But as more companies enter this arena to diversify their portfolios, some have discovered that retail is not always a sure-fire investment.
Majid Al Futtaim (MAF) is currently evaluating strategic options for its MAF Fashion retail division, including a possible sale of the subsidiary, which holds the rights to sell Liz Claiborne brands such as Mexx, Lucky Brand Jeans and Juicy Couture in the Middle East. The group - which owns and operates the Mall of the Emirates and seven other shopping centres in the UAE, Oman, and Egypt - may exit the retail business as profit margins contract.
"You can be a jack of all trades and a master of none," said Mr Ghafoor. "Businesses should stick to what they know if they want to succeed." @Email:vsalama@thenational.ae
