Pressure on UAE retailers will rise over the next two years as 900,000 square metres of retail space is added to an oversupplied market competing with an ever-growing e-commerce sector, according to a report by real estate consultancy Knight Frank.
UAE retailers that used to enjoy double-digit sales growth ranging between 10 and 15 per cent now will have to contend with “modest” single-digit growth, the report said, pointing to a softening in the retail market because of uncertain consumer confidence.
While well-established malls with higher footfall will hold on to their “healthy” occupancy rates, rent calculations will have to change, according to Matthew Dadd, a partner with Knight Frank.
“We do see a correction on the way as to how rents are calculated with malls and retailers becoming retail partners sharing far more of the profits rather than demanding large base rents,” said Mr Dadd in telephone interview.
“The delivery of additional retail supply is expected to put pressure on overall occupancy rates. The likes of H&M or Prada won’t close down but they may change their shop formats to rely less on revenues in-store.”
The report was also less-than-certain about macro conditions easing the pressure on retailers, who are suffering from a strong US dollar, to which the dirham is linked, and poor purchasing power of residents grappling with the economic slowdown.
“Consumer confidence is low amid job insecurities and the higher cost of living has impacted residents’ purchasing powers,” the report said. “In addition, the strengthening of the US$ is showing little respite, particularly with the potential for interest rate hikes in 2017. This will ultimately push the dirham even further, making the country an expensive retail destination, especially for luxury shoppers from countries such as China, Russia and India.”
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 the broker JLL. The potential entry of more than 300,000 sq metres of additional retail space this year poses a risk of oversupply to the market, according to JLL.
In January, CBRE also forecast 900,000 sq meters of retail space would be added between this year and 2019 to the existing 3 million sq meters.
“I think Dubai’s secondary and tertiary malls are facing new supply challenges, apart from macro conditions,” said Matt Green, the head of research and consultancy at CBRE.
He said Abu Dhabi was a different case with the two best performing malls being Al Wahda Mall and Dalma Mall.
“These are in good locations and solidly looking after the mid market,” said Mr Green. “They offer value propositions with great occupancy. People don’t come to look at the fish tank or the ski slope, they go to them to spend money.”
Another external pressure highlighted by the report was the burgeoning threat of e-commerce although its exponential growth was not expected until 2021.
“The e-commerce sector could not have boomed in the UAE without its infrastructure having been organised,” said Mr Dadd.
“The postal addresses in the country have being regularised over the past couple of years but if one looks to Saudi Arabia that is still way off.”
The e-commerce sector has had a flurry of M&A activity in the UAE over the past couple of months with smaller players being aggregated into larger concerns but smaller established players are still recording huge growth.
“We received US$67 million in funding in 2016, after only a year of trading, and we saw sales quadruple in 2016,” said Pratik Gupta, the co-founder of Wadi.com. He would not comment on whether he thought Wadi.com was likely to be bought out by any big competitor.
“In 2017, sales have tripled already and last month we became operationally profitable,” he said. “We have big plans for the future and we strongly believe that whether there are two or three or four players in the market, we will continue to grow.”
ascott@thenational.ae
Follow The National's Business section on Twitter
UAE currency: the story behind the money in your pockets
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
More from Aya Iskandarani
The specs
Engine: four-litre V6 and 3.5-litre V6 twin-turbo
Transmission: six-speed and 10-speed
Power: 271 and 409 horsepower
Torque: 385 and 650Nm
Price: from Dh229,900 to Dh355,000
The Pope's itinerary
Sunday, February 3, 2019 - Rome to Abu Dhabi
1pm: departure by plane from Rome / Fiumicino to Abu Dhabi
10pm: arrival at Abu Dhabi Presidential Airport
Monday, February 4
12pm: welcome ceremony at the main entrance of the Presidential Palace
12.20pm: visit Abu Dhabi Crown Prince at Presidential Palace
5pm: private meeting with Muslim Council of Elders at Sheikh Zayed Grand Mosque
6.10pm: Inter-religious in the Founder's Memorial
Tuesday, February 5 - Abu Dhabi to Rome
9.15am: private visit to undisclosed cathedral
10.30am: public mass at Zayed Sports City – with a homily by Pope Francis
12.40pm: farewell at Abu Dhabi Presidential Airport
1pm: departure by plane to Rome
5pm: arrival at the Rome / Ciampino International Airport
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
MATCH INFO
Uefa Champioons League semi-final:
First leg: Liverpool 5 Roma 2
Second leg: Wednesday, May 2, Stadio Olimpico, Rome
TV: BeIN Sports, 10.45pm (UAE)
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
BUNDESLIGA FIXTURES
Friday (all kick-offs UAE time)
Hertha Berlin v Union Berlin (10.30pm)
Saturday
Freiburg v Werder Bremen (5.30pm)
Paderborn v Hoffenheim (5.30pm)
Wolfsburg v Borussia Dortmund (5.30pm)
Borussia Monchengladbach v Bayer Leverkusen (5.30pm)
Bayern Munich v Eintracht Frankfurt (5.30pm)
Sunday
Schalke v Augsburg (3.30pm)
Mainz v RB Leipzig (5.30pm)
Cologne v Fortuna Dusseldorf (8pm)
Gulf Under 19s final
Dubai College A 50-12 Dubai College B
MATCH INFO
Manchester City 2 (Mahrez 04', Ake 84')
Leicester City 5 (Vardy 37' pen, 54', 58' pen, Maddison 77', Tielemans 88' pen)
Man of the match: Jamie Vardy (Leicester City)
Read more about the coronavirus
Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
COMPANY PROFILE
Name: Lamsa
Founder: Badr Ward
Launched: 2014
Employees: 60
Based: Abu Dhabi
Sector: EdTech
Funding to date: $15 million
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Yuki Means Happiness
Alison Jean Lester
John Murray
Killing of Qassem Suleimani