The UAE’s retail property sector is yet to rebound to pre-COVID-19 levels even as shoppers have returned to the malls after the lifting of restrictions due to the pandemic.
Average leasing rates across primary and secondary malls in Dubai fell by 1% in 2022 compared to a year ago, while rents in Abu Dhabi were flat throughout the same period, according to JLL in its latest report.
The retail sector, which was among the hardest hit by the pandemic, was the only sector to show a decline in demand last year, with rents in both Dubai and Abu Dhabi’s residential and office sectors rising by up to double digits.
In Dubai, rents for office and residential properties went up by 21% and 27%, respectively. In Abu Dhabi, average rents for Grade A office space rose by 8%, while apartments and villas registered a 1% growth.
Rents across shopping malls in the two cities fell in recent times, especially after the COVID-19 lockdown that forced many retailers to shut their doors and shoppers turned to e-commerce. Players in the market are currently capitalizing on high demand for online shopping.
“The sustained growth of online shopping means that retailers are strengthening their digital presence to bolster revenues in an increasingly competitive environment,” JLL noted.
The consultancy firm, however, pointed out that demand for brick-and-mortar space is rising in the UAE’s prime locations, citing that average rents for “super-regional malls” in Dubai rose by 3% in the fourth quarter of 2022, when compared with the same period in 2021.
“It is important to note that well-located super regional malls have been benefitting from returning tourists, which in turn helped underpin the growth in rents for this segment within the retail sector,” JLL said.
Developers also continue to boost supply in the market, with the delivery of around 200,000 square metres of retail floorspace last year raising Dubai’s total stock to 4.63 million square metres.
This year, around 355,000 square metres of space is scheduled to be handed over across the city, the majority of which is likely to be delivered by a new super-regional mall and two existing ones that are undergoing an expansion.
Retail stock in Abu Dhabi was unchanged last year, but the UAE capital is likely to see the delivery of 232,000 square metres this year.
“Owners of retail assets and franchise operators remain focused on bringing unique entertainment concepts to drive footfall,” JLL said.
“What’s more, landlords have been offering favourable lease terms and incentives to attract new international brands, especially in the F&B segment.”
From January to October last year, around 11.4 million international travellers visited Dubai, up by 134% from a year earlier, according to Dubai’s Department of Economy and Tourism.
(Reporting by Cleofe Maceda; editing by Seban Scaria)