Dubai ranked top destination for international retailers, despite 'softer' market, CBRE says

Consultancy warns retail market is oversupplied, with falling rents and rising vacancy

Dubai has ranked the number one destination for international retailers, with more than 60 per cent of global brands studied in a new CBRE report having operations in the emirate. Vacancy rates at priShow more

Dubai is the number one market for international retailer presence, with more global brands present in the emirate than in any of the 122 cities examined in a new report by real estate consultancy CBRE.

However, the emirate’s retail market is oversupplied, and some malls may have to be repurposed over the coming years.

More than two-thirds (62 per cent) of the 334 international retailers in the study are present in Dubai, according to the report released on Monday. The emirate also welcomed 59 new retail brands in 2017, making it the second top destination in terms of new market entrants after Hong Kong.

“Dubai remains the most attractive market in the region for retailers, with many using the emirate as a ‘launch pad’ for regional expansion,” said Nick Maclean, managing director of CBRE Middle East and Turkey.

The UAE overall performed well, with Abu Dhabi ranking fourth with 51 per cent of international retailers present in the emirate. Shanghai in China came second, with 55.3 per cent, and London came third with 51.7 per cent.

The retail sector in the UAE is expanding with a number of new developments particularly from Dubai-based real estate firms Emaar Properties and Nakheel, which are building malls and communities throughout the emirate.

However, CBRE said that Dubai has experienced "a general softening of retail market conditions" over the last 24 months, resulting in falling rents and rising supply. The market also faces disruption from the growth of e-commerce and retail technologies.

“Together with the expected growth in online shopping and increased importance of F&B [food and beverage] and entertainment, the value of bricks and mortar outlets and the contractual relationship between landlords and tenants is set to change substantially,” Mr Maclean said.

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An estimated 1.5 million square metres of extra retail space is set to be delivered in Dubai over the next three years, adding to the current 3.1m sq metres, the report noted. Nakheel’s planned Dh4.2 billion Deira Mall, the Meydan One shopping centre, and a mall at Emaar Properties’ Dubai Creek Harbour are examples.

Yet the market does not currently have the capacity to absorb this, Mr Maclean told The National. "The market in terms of occupiers is not going to grow by 50 per cent so we're going to see the redevelopment, or reusage, of some of the retail locations that are not demanded at this time."

Those spaces could be redeveloped into new housing, or different types of retail or services, such as healthcare or F&B-only schemes. “There needs to be some rethinking of some malls that are not going to work,” he added.

Still, occupancy rates at prime malls such as Dubai Mall, Mall of the Emirates and Ibn Battuta are running at around 95-98 per cent, and Dubai is perceived as an attractive destination for global retailers because of its high per capita spend, fast-growing population and innovative approach to development, the report said.

“Dubai has been at the cutting edge of retail developments over the last 15 years, and I expect us to be there again,” Mr Maclean said. “It’s an awkward market at the moment, but I think [in the] medium term it’s going to be good.”