Nakheel is going head to head with Emaar in the race to generate more revenue from Dubai’s booming retail industry.
The pair, who entered the record books by building vast projects such as Nakheel's Palm Jumeirah and Emaar's Burj Khalifa, are now seeking to hedge against the cyclical property sector.
The dramatic collapse of property prices five years ago had a massive impact on both companies. In the case of Nakheel it was a major reason behind the subsequent debt restructuring of its then parent, Dubai World.
By focusing on the recurring revenues offered by managing shopping centres, Dubai's big developers are creating more sustainable business models.
But while Emaar's biggest retail claim has come from building The Dubai Mall, the world's most visited shopping centre, Nakheel is seeking out opportunities in smaller community-based developments.
Nakheel is currently building five community malls which will cater to their immediate neighbourhoods. Jumeirah Park, situated behind Jumeirah Islands and The Meadows, opened yesterday housing 30 leasable retail and food and beverage outlets.
“What Nakheel are doing is to create regular annuity income, basically regular cash flow from one year to the next,” said Craig Plumb, the head of research for property consultants JLL. “With a residential development you build and sell it and it’s gone, with retail you retain ownership of the mall and you get rent every year. The retail market is becoming more competitive and there will be winners and losers.”
Emaar said on Sunday that its Emaar Malls Group would launch an initial public offering of shares on the Dubai Financial Market this month, in the most eagerly anticipated share sale in years.
The company’s biggest asset is The Dubai Mall, which attracted an estimated 75 million shoppers last year. Assets also included in the IPO are the smaller Dubai Marina Mall, about 30 smaller retail centres, the Souk Al Bahar entertainment complex in Downtown Dubai and the Gold & Diamond Park, the retail outlets for precious metals and jewellery.
Nakheel’s focus on community malls is part of a wider goal to triple the amount of retail space it owns and manages in the next five years.
Currently the company leases 2.3 million square feet of retail space with Ibn Battuta Mall and Dragon Mart.
Both malls are undergoing expansion, with Dragon Mart set to double its retail space.
Last week, Nakheel opened its first community mall in Dubai’s Jumeirah Park, which will have 30 retail and food outlets. Nakheel is also developing its 300-store Nakheel Mall on Palm Jumeirah, which will be a much more high- profile destination mall for tourists as well as the local Palm community.
“Obviously we are conscious of the fact we need to increase the proportion of retail within the development cycle,” said Sanjay Manchander, the chief executive of Nakheel. “At present we are 20:80, retail versus development, and our strategy is to double the proportion of retail and leasing to 40:60.
“Our strategy is to increase our cash-generating assets and help the business overall, then we can increase the longer-term business contribution for the retail and leasing portfolio.”
ascott@thenational.ae
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