UK's austerity drives up rents at big malls in Dubai

An influx of retailers form the UK is pushing up rents for al in Dubai's malls

The influx of retailers from the United Kingdom into the UAE this year has forced up rents in some of Dubai's biggest shopping malls.

Austerity measures in the UK and weak economic growth have caused many retailers to seek respite and expand overseas, with Dubai often seen as a first port of call to gauge international demand.

Analysts say the recent inflow of UK retailers has led to rents rising in Dubai malls where international retailers have to be seen to have a presence.

"Demand for premium retail space in the large malls has been buoyed by the entrance of a number of UK retailers," said the property specialist Jones Lang LaSalle in its latest report.

"The top open-market rent for a notional standard shop in prime super regional centres has continued to move upwards in [the second quarter]."

M&Co, a Scottish fashion retailer with nearly 300 stores across the UK, has opened two major stores, in Dubai Mall and Dubai Marina Mall. The retailer, which operates in the Middle East under a franchise agreement with Liwa Trading Enterprises, has also agreed to open a store in the extension of Abu Dhabi's Al Wahda Mall.

WHSmith, a British books, newspaper and stationery retailer, last year appointed AventusRetail as its franchisee in the UAE. It has since opened in Dubai Marina Mall and Dubai Mall.

Topshop, operated by MH Alshaya in the Middle East, is also set to open a store on Wednesday in Mall of the Emirates, and LKBennett, a British women's brand, opened in Mirdif City Centre.

"With the influence of expats and tourists, Dubai is an obvious place for expansion for those brands," said Craig Plumb, the head of research at Jones Lang LaSalle. "British retailers have had a presence here for some time, and now there's more coming in. That positive effect is being focused on a few malls."

Deira City Centre and Mall of the Emirates are almost 100 per cent leased and continue to outperform the other malls, according to Jones Lang LaSalle's report. The top malls can now charge Dh5,900 (US$1,606) per square foot of store spaceper year.

"Dubai Mall is seeing an increase in its occupancy rates with more retailers looking to be based in one of the biggest shopping centres in the world, which attracted 54 million visitors in 2011," the report said.

Other British retailers have pledged to open stores throughout the UAE and elsewhere in the Middle East. Asda, the UK retailer owned by Wal-Mart, signed a deal with Azadea, a retailer based in Beirut, and the supermarket chain Tesco will also roll out its F&F brand with the help of Fawaz Abdulaziz Alhokair & Company.

"For any of these major brands, when their home markets are not performing, you expect them to look at areas where they are seeing growth," said Matthew Green, the head of research and consultancy at the property specialist CBRE.