Dubai will not feature any new giant malls for about five years, says the global trade association of the shopping centre industry. Instead, the city will see smaller community shopping centres come in as the drop in land prices makes them more viable for developers, the organisation says.
Michael Kercheval, the president and chief executive of the International Council of Shopping Centres, said although the Middle East was "under-retailed", Dubai would not need more major retail developments for about five years. "There isn't going to be the need for anything new unless the tourism market picks up again," Mr Kercheval said yesterday at ReCon, the shopping centre conference in Dubai. New retail developments will instead be smaller, more localised centres to cater for neighbourhood needs, he said.
"The reason it has not happened [before] is because of land prices," Mr Kercheval said. "The building costs would not support a shopping centre with a lower level of sales per square metre, and as costs have come down, now it becomes affordable to build a shopping centre that doesn't have US$1,000 [Dh3,672] per square foot in sales." Mr Kercheval's comments show a shift in the emirate's retail strategy. Dubai enjoyed years of double-digit growth and a retail building boom that has helped it become the second-most popular city for international retailers, just behind London and ahead of Paris and New York, the latest data from CB Richard Ellis showed. But after the high-profile openings of Dubai Mall and Mirdif City Centre, the flow of new retail projects has slowed to a trickle.
The reassessment of retail property in the emirate comes after a difficult year for retailers in the UAE. While there are no official figures, retailers estimate sales have dropped as much as 40 per cent, especially for big-ticket discretionary purchases such as jewellery. David Macadam, the MENA director for Jones Lang LaSalle, said in this situation developers would not contemplate many new shopping centres as the existing customer base was already well served.
"I think it will be status quo for a little while, but there are opportunities for more and more community centres," Mr Macadam said. "If you look at the likes of, say, Palm Jumeirah, there is no community centre there with a Spinneys, for example, or a Carrefour express - convenience shops for modern-day life." But opportunities abound in other parts of the Middle East, such as Syria and Egypt, he said. Majid Al Futtaim Group is planning to open at least four shopping malls, at a cost of $3.5 billion, by 2014 in Fujairah, Egypt, Syria and Lebanon.
Shahram Shamsaee, the senior vice president of retail for Majid Al Futtaim Shopping Malls, told the conference yesterday while last year saw a correction in the GCC other markets, such as the Levant and North Africa, saw increased sales. "In Egypt we had very strong 30 per cent growth like for like growth in sales [last year]," Mr Shamsaee said. "It was as if the Egyptian consumer didn't realise there was a global recession. But a lot of that is because you have some underserved markets there, in terms of retail."
Mr Kercheval said regional markets such as Saudi Arabia, Iraq and Iran would continue to provide major opportunities for retailers. Terry Lundgren, the chairman and chief executive of Macy's, the parent company of the US-based Bloomingdale's department stores, said the company was exploring retail opportunities in Abu Dhabi. On Saturday, as part of a visit to the capital, Mr Lundgren looked at shopping centres and met developers behind proposed malls.
He said there were no immediate plans for another Bloomingdale's abroad after the opening of a store in Dubai Mall with the Al Tayer group in January, but the company was exploring its options. @Email:aligaya@thenational.ae