Majid Al Futtaim malls are holding up despite the strong US dollar
Retail activity remains healthy at Majid Al Futtaim malls and e-commerce has yet to dent its sales, despite the strong dollar and currency fluctuations, says a senior company executive.
For the Dubai-based company, which owns and operates 14 shopping malls in the UAE with six of them in the emirate, it is business as usual, although the UAE dirham’s peg to the US dollar, which has appreciated against a basket of currencies, has made the UAE an expensive destination for some tourists.
“If retail was going down, then you won’t see the growth, you won’t see the city developing, you won’t see most international brands keen to be a part of the city,” said Fuad Sharaf, the senior director for property management at Majid Al Futtaim Properties, a unit of the conglomerate.
Majid Al Futtaim is banking on retail growth in the UAE. It announced in June last year Dh30 billion of investments, which is likely to be in place by the time Dubai Expo 2020 takes place. The plans include opening 10 new city centre malls, six hotels, 28 cinemas, 40 Carrefour supermarkets and a 740,000 square metre master-planned community over the next 10 years, in a move that will generate about 170,000 direct and indirect jobs.
Some malls are reporting lower retail sales as the strong dollar bites and slower economic growth leads to job cuts and lower purchasing power.
In the UAE, “a number of retailers reported a decline of sales last year and performance of retail markets could remain under pressure if the US dollar continues to strengthen”, the consultancy JLL said last month.
Retail space in malls is also expanding quickly, leading to a supply glut that could further threaten the recovery of sales.
Last year, Dubai’s retail sector added 260,000 sq metres of space, the highest since 2010, including the expansion of Dubai Festival City, The Avenue in City Walk, Ibn Battuta Mall and new community malls such as Shindagha City Centre, according to JLL. “Given muted market activity and demand, the potential entry of more than 300,000 sq metres of additional retail [space] in 2017 poses a risk of oversupply to the market,” the JLL report said.
Another rising threat to retailers is new online offerings. Mohamed Alabbar, the chairman of Emaar Properties, and investors plan this month to launch Noon.com with up to 20 million products. Mr Sharaf downplayed the effect of online shopping on the wider sector.
“Online business is something which is happening, but we will always have the components that will continuously attract people [such as] restaurants, cinemas and entertainment,” he said. “I don’t see the impact of online shopping as mall expansions are happening, more projects are in the pipeline, the demand is there and retailers who are online are still keen to have a representation in the malls.”
“We are not denying online shopping’s [potential] and we are looking closely into the online business,” he said.
For now, Majid Al Futtaim is buoyed by retail sales during the 34-day Dubai Shopping Festival that runs until January 28. The conglomerate is targeting visitors especially from the Arabian Gulf, the Middle East, China, Russia and the subcontinent. “We are a part of the world, currency fluctuations will take place but we are still doing good,” Mr Sharaf said. “It is too early to judge [performance during DSF] but it has been very positive.”
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Updated: January 9, 2017 04:00 AM