Majid Al Futtaim (Maf), the mall owner and operator, is shifting its investment focus to domestic customers rather than international visitors, as it predicts a slowdown in sales will continue into next year, a company official said on Sunday.
Maf said it was changing its strategy because of a softening economy in the first half of this year, low oil prices and a tourist market still struggling with the loss of Russian and Chinese visitors. Retail sales have also been hurt by the strength of the dollar, to which the dirham is pegged.
"We think there will be a slowdown in 2017, but our new focus on the domestic market will mitigate that," said Kim McInnes, the chief executive of shopping malls at Maf. "Sales are slowing, we have seen it in our turnover rents. Generally, it's only a slight slowdown in sales but its noticeable."
He was speaking at the opening of the group’s 20th mall, My City Centre Al Barsha, in Dubai’s Arjan area. A smaller community mall of 3,700 square metres, with about 20 shops, it is the second such mall built as part of Maf’s strategy to keep the tills ringing while the economy is sluggish.
Mr McInnes said malls that have focused predominantly on luxury were particularly vulnerable as that had shown a dramatic softening.
He also expects that rents for shopkeepers will plateau or fall this year.
“Ultimately there will be a plateauing of rents as rents are a function of sales, but we don’t see a crash in rents coming,” Mr McInnes said. “We have detailed 10-year projections right now to see what the future retail scene will look like.”
Maf announced investments of Dh30 billion in the UAE in June, which are likely to be in place by the time Expo 2020 takes place in Dubai.
The group revealed plans to open 10 new City Centre malls, six hotels, 28 cinemas, 40 Carrefour supermarkets and a 740,000 square metres masterplanned community over the next 10 years, in a move that will generate about 170,000 direct and indirect jobs.
Maf said last year it planned to double in size within five years as it improves investments across the Arabian Gulf countries and Egypt.
While the oil price has stayed at about US$50, Dubai’s economy has shown resilience and begun to show signs of recovery, with house prices posting their first gains in two years in the second quarter, according to property consultant Core Savills. Economic sentiment in the UAE also ticked up slightly in July, as businesses reported an increase in new orders and output, according to the latest survey of purchasing managers by Dubai lender Emirates NBD.
This positive outlook is upheld by developer Nakheel, which announced a new Dh16 billion mall in Nad Al Sheba last week as part of the 13 million sq feet of retail space to be delivered over the next five years.
The slowdown has so far not deterred the region’s shopping mall developers, with the development of new retail space growing at a faster rate than last year, industry analysts CBRE said in May.
Dubai has 361,127 sq metres of retail space under construction, making it the most active mall-building city in the Emea region behind Moscow and Kiev, thanks to mega-projects including the Nakheel Mall and The Point on the Dubai Palm, CBRE said.
In June, Dubai was ranked by property consultancy JLL as the fourth most attractive market in the world for retailers, behind London, Hong Kong and Paris.
JLL also said Dubai already had one of the highest per-capita levels of retail space in the world, as it has developed a reputation as a shopping tourism destination.
ascott@thenational.ae
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