06 Dec 2006
Dubai: Surging land prices are changing the face of Dubai retail, all but ending the days of huge stand-alone shopping malls similar to Mall of the Emirates, according to industry specialists.
Land prices up to 10 times higher than five years ago in some areas also mean new retail developments are expanding upwards rather than outwards and must be "mixed-use" to get off the ground.
"Most dominant shopping centres are horizontal developments, but because of the costs these days we're looking at vertical growth by adding in hotels, apartments and offices - this is the only way to make the building work," said Shahram Shamsaee, senior vice president for leasing at Dubai-based retail giant MAF Shopping Malls.
"You're better off buying a large piece of land and planning a multi-use development where you can diversify risk across three of four different components rather than concentrating it on retail.
"Five years ago when you were looking at the feasibility of a Mall of the Emirates style mall it worked out pretty favourably, but if you want to develop a similar project in the market today it's hard for it to stack up," he said.
However, Shamsaee said the company's retail operations are still giving the best returns compared to its residential operations.
With booming tourism and a growing population, GCC countries are currently constructing 500 shopping malls. Gross leasable area in the GCC is expected to reach 12 million square feet by 2012, while the pan-Middle East retail market is set to top $100 billion.
Looking at the huge new supply of shopping malls, Phil McArthur, managing director for shopping centres and commercial real estate at Al Futtaim Group Real Estate, said developers are failing to do their homework before ploughing their money into new malls.
"I'm astounded at the number of new projects with no market research. It shouldn't only be done before you build. It should be updated as you're building to see what is happening in the market around you," he said.
However, Stan Eichelbaum, president of US-based Marketing Developments [which has advised several Dubai-based mall operators], said Dubai's mall developers have mostly got it right so far.
"The first generation of smaller malls in Dubai was definitely a learning curve and some were very poorly done," he said.
"There are some malls which are still questionable, where they believe that architecture is more important than demand, but malls like Mall of the Emirates are spectacular. Over the last year Dubai's market has entered new maturity and it's really at the forefront of world retail today."
By Robert Ditcham
Gulf News 2006. All rights reserved.
