Shop rents drop as retailers feel the pinch

The average retail rent for a new store in Dubai fell by 6 per cent in the second quarter, compared with the first quarter of this year, according to a report by the property research firm Jones Lang Lasalle (JLL). And as retail sales in the UAE fall during the economic downturn, and vacancies increase in the smaller, less desirable malls, more landlords are willing to renegotiate their rates, said Craig Plumb, the head of research for Jones Lang Lasalle MENA.

"There is a more general trend that the owners need, and are starting to value their tenants, than they have been in the past," he said. "I would say going forward there will be more openness and more willingness to renegotiate." The average rental rate in Dubai across all retail centres was Dh330 per square foot at the end of the second quarter, down from Dh351 at the end of the first quarter of this year, according to the firm's latest Dubai Retail Market Snapshot report. This is an 8 per cent drop from the peak retail rental highs in the third quarter of 2008, at Dh355 per square foot, said Mr Plumb.

Rents at some of the smaller, less popular malls, where vacancies are on the rise, have dropped by 18 per cent in the second quarter compared with the first three months of the year, Mr Plumb said. However, some of the larger malls, which still have occupancies above 95 per cent, have not dropped their rates, he said. The developers behind the emirate's two largest malls, Mall of the Emirates and Dubai Mall, have both said they would not reduce rents. [e-mail]