Retailers target regional markets

From left, Thiery Chaunu of EAI, John Hadden of Alshaya, Mohammed al Fahim of the Paris Gallery Group and Mohammad al Madani of Al Madani Group at the Retail City conference in Dubai. Paulo Vecina / The NationalShow less

Retailers are setting their sights on regional markets such as Saudi Arabia and Egypt, as the UAE attempts to fill up its available shop unit space. The shift in focus comes after a difficult two years for the regional retail industry, particularly in Dubai. Saudi Arabia and Egypt are attractive because of their growing middle-class populations and increasing propensity to spend, according to industry insiders.

"There is a lot of stuff being talked about in Egypt at the moment. That's an area where a lot of people are focusing their attention," Shahram Shamsaee, the senior vice president of asset management at Majid Al Futtaim, said at the Retail City conference in Dubai. "There is opportunity in Saudi, in Riyadh. There is nothing in that city today, so for a city of that size, for a large developer, there is an opportunity."

Over the past five years, Dubai enjoyed a retail building boom, opening huge shopping centres such as Emaar's Dubai Mall, one of the largest in the world. The gross leasable area (GLA) per head increased by more than 30 per cent in that period, from 10.5 square feet in 2006 to its current level of nearly 14 sq ft. In that time, Dubai became the second-most popular hotspot for international retailers, just behind London and ahead of Paris, according to CB Richard Ellis, a property consultancy.

But retailers and developers say that has now reached saturation point. About 20 per cent of outlets in shopping centres in the emirate are vacant, excluding Mall of the Emirates, says the research firm Jones Lang Lasalle. David Macadam, the regional director of retail for Jones Lang LaSalle in the MENA region, said: "Some of the retailers now are rationalising where they are at." Mohammed al Fahim, the chief executive of the Paris Gallery Group, said it had closed down more than 50,000 sq ft of retail space in the past couple of years.

"That means the location was not a great added value, strategically, for us," he said at Retail City. "Locations where our customers were not there we closed or downsized, and the locations where the customers are going to be in the future, we opened. And we are continuing to do this." Mohammad al Madani, the chief executive of Al Madani Group whose brands include Levi's jeans, said it also closed its loss-making stores.

"There are certain malls where there is traffic, but without tourists coming in, that definitely has an effect on some other malls," he said. "They have to do some hard work now." While there is some demand in Abu Dhabi and other emirates, and room for small shopping centres even in Dubai, many retailers are shifting their expansion to other parts of the Middle East, such as Syria - where retail is just beginning to develop - Saudi Arabia and Egypt, with its large population and growing middle class.

An informal poll conducted among about 100 attendees of the Retail City conference, which runs alongside the Cityscape Global property exhibition, showed that 41 per cent considered Egypt showed the most promise, followed by Saudi Arabia at 21 per cent, and the UAE at 11 per cent. "Retail is now a hot issue," said Mohamed Galal, the managing director of Mubadala Misr, based in Egypt. "Especially now that the government is trying to develop the south of Cairo. The 60 million population there is not being serviced today."

Joe Nahhas, the regional brand director for Mont Blanc based in Dubai, said the brand enjoyed the most regional growth in Saudi Arabia. Other emerging markets such as Iraq and Iran have some potential, but concerns about security and barriers to foreign investment have deterred immediate plans, said Tony Jashanmal, the managing director of the Jashanmal retail group. "In the long term, both are very promising because of the income, lack of supply and low level of sophisticated modern retail," he said.