Dubais small malls offer breathing space for retailers

Monday, Jan 04, 2016

Dubai: Retailers in Dubai have got themselves some breathing space - literally.

A spate of smaller/community shopping centres have opened up across the city allowing retailers - especially small and mid-tier brands as well as F&B concepts - to open up at new locations and not have to wait for years to get a spot at one of the destination malls. These new additions have eased the pressure on retailers who rely on a minimum number of new store openings each year for their organic growth.

“The next round of new big malls (such as those on Deira Islands and Palm Jumeirah) as well as ongoing expansions at existing ones (at The Dubai Mall and Dubai Festival City) are one to three years from delivery,” said Matthew Green, Head of Research at CBRE’s regional operations. “Between now and then, the community malls will have it all to themselves when it comes to absorbing much of the demand for retail expansions.

“For the master-developer too, the community malls come with many pluses. It improves on their rental income and where there is an established retail presence, it helps build up the attraction of the community as a residential destination. This has been happening across the various Nakheel communities such as Jumeirah Gardens and Jumeirah Village.

“In their own way, CityWalk and its extension as well as BoxPark are delivering new possibilities. For retailers in search of good visibility, BoxPark ticks the right boxes. And it’s got a funky branding too.”

Third-party mall developers are also making a beeline for locations within or adjacent to emerging communities. The Majid Al Futtaim Group opened one near International Media Production Zone, while the Lulu Group owned Avenues Mall is at Silicon Oasis.

For retailers, the new capacities couldn’t be better timed. At the city’s leading malls, it is next to impossible to get an immediate store location. At best they can make it to a waiting list and wait their turn. Even that is no guarantee as mall promoters have a preference for blue-chip international brands - and preferably brand new to the region - to populate their newly created areas.

According to a top executive with one of the leading retail-focussed business groups in Dubai, “These is no other option since brands that are new and wish to enter this market need to find a footprint, which they can then show to the major malls. Everyone is looking for openings in the regional malls - but since there is no space available, this is the only alternative.

“The lower cost of entry also allows people to get a feel of the market and for established players makes the expansion more affordable. However, the returns are also relatively much lower, and this needs to be factored into the plans.”

Depending on the location, rents at the small/community malls would be between Dh200-Dh450 a square foot, while those at one of the bigger malls in the city would hover around Dh750 a square foot.

According to Sajid Sayed, regional General Manager at the apparel brand Giordano, “The opening of community malls has made the playing field larger... this has opened up the market place and presented more opportunities to retailers. It is up to us retailers how best we use this to our advantage. It is more of an organic growth that will bear fruit when this thinking process matures.”

In a marketplace where consumer sentiments are at best muted, a location at a community mall also eases the pressure on a retailer’s costs.

“High traffic malls most definitely make all the difference - but it the customer profile and the disposable income that we need to be more conscious of,” said Sayed. “Not all high traffic malls have the same spending patterns and retailers need to balance this.”

According to Shivam Goyal, Chief Operating Officer at the Landmark Group owned SportsOne chain of stores, being cost conscious works well in the current environment.

“Clearly, smaller/community malls have a more economical approach and hence maintain more cost-effective strategies, giving us retailers an edge (compared with) being present across larger and more premium malls,” said Goyal.

“We’re currently speaking about over 100 malls in the UAE, a hefty share of which goes to community malls. There are several projects in the pipeline and a significant number of these are community.”

Retailers sure will not be complaining about the mix.

By Manoj Nair Associate Editor