Overly ambitious malls cause for setbacks

Retail construction projects are becoming "too ambitious," leading to setbacks industry insiders have said.

It is common for grandiose retail construction projects like the Dubai Mall in Dubai to experience completion delays.

DUBAI // Grandiose retail construction projects are becoming "too ambitious," leading to setbacks and structural problems, as well as headaches for retailers looking to fill the malls, industry insiders have said. "It is a resource issue," said Nicholas Maclean, the managing director for CB Richard Ellis, Middle East, one of the world's largest property consultants. "Some developers are not delivering on schedule because there is a lot of construction to be done and you need a lot of people to do it."

The delayed completion date of several major developments, including those in Dubai's new "downtown" district, has been raising concerns about the city's ability to sustain so many projects on such a large scale. Emaar Properties, the largest property developer in the Middle East, recently announced another delay in the opening of the Dubai Mall. The opening of the shopping and entertainment centre, which will briefly hold the title of the world's largest mall, is now scheduled for October 30, pushed back from the previous date of August 28.

The mall, which will feature 1,200 stores, as well as an ice rink and the world's largest aquarium, had originally been scheduled to open late last year. Additions to the design pushed back the opening date, said Emaar officials. "Developing a global landmark project like the Dubai Mall is a very complex process," said Yousif Al Ali, the general manager of the Dubai Mall. "It involves co-ordination with project managers, government authorities and retail tenants.

"With the revised opening date, retailers will benefit from the added time as they can concentrate on a more thorough fit-out and prepare training, merchandising and all operations for the key retail period that follows the mall's opening," he added. However, Mr Maclean believes that delays by many of the major mall developments are a result of the sheer size of the projects. "I think it is a physical construction issue and not so much a letting issue. They were just too ambitious in their early days," he said. "Regardless of the problems, developers must go forward with projects and see it through to the end, otherwise it will inevitably effect their reputation down the line."

On the heels of the Dubai Mall is Ilyas & Mustafa (I&M) Galadari Group's giant Mall of Arabia, which at 930,000 square metres, will be larger than the Emaar project when it opens in 2010. Already some industry insiders speculate it too will be late. "There are not enough people here in Dubai to get all the construction projects done," said Mr Maclean. "It needs too many resources, the people working on construction are new to the region and there are procurement issues, so we find that almost every scheme is delayed to some extent."

Robert Ziegler, the vice president of management consultancy AT Kearney in the Middle East, said ultimately it is the developer who suffers the consequences of setbacks. "When they have construction delays, somebody has to pay for it," he said. "Some of it goes to construction firms, but a lot of it sticks with you, so your investment goes up, your revenues get delayed and that is a big impact for the developer.

According to Retail International, a British consultancy firm, a massive 16.35 million square metres of retail space is scheduled for completion in the GCC by 2010 with some 2.6 million square metres of gross leasable area (GLA) projected to be ready by next year. The UAE will see the highest increase in the Gulf, contributing 44 per cent, according to Colliers International. With this and many more retail projects in the pipeline, including an ambitious goal set by Nakheel to build 100 malls in Dubai over the next 20 years, many believe retailers are the ultimate victims of project delays.

"When you don't hit your target, it may cause the retailer more problems than for the developer because they make the commitment to the brands in terms of a business schedule," explained Fred Douglas, the director of leasing for Aldar. "Retailers will have activated their supply chains [based on set completion dates] and they cannot sell goods in stock or at least in transit due to the delays," added Mr Ziegler. "Every day of delay means lost sales, stock charges, perished goods and additional transportation cost."

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