While the continuing expansion of Dubai's retail offering can be regarded as typical of the emirate's dynamism and an inarguable boost to its draw as a major tourist and business destination, is there a danger that the retail market is becoming saturated?
Successful retailing and retail development is all about knowing or anticipating customer and client needs and wishes.
Dubai has enjoyed an outstanding success story, providing a platform for a full spectrum of domestic and international customers. Its investment, in particular in aviation, the DIFC and internationalisation have made the emirate, in our view, the second most important location for cross-border retailers after London. It is not coincidental that both of these cities are overtly multicultural and are home to their respective regions' busiest airports.
The CBRE "How Global is the Business of Retail" report shows that about 50 per cent of all international retailers currently operate in Dubai, meaning, obviously, that 50 per cent are not yet here.
The largest retail developers – Majid Al Futtaim, Emaar and Al Futtaim Group – are all expanding their major retail assets and are planning new centres as they openly discuss their frustration at the strong demand that they are unable to accommodate because of full occupancy.
Retail sponsors are being pressed to expand brand exposure throughout the region and CBRE is repeatedly approached by retailers, not yet here, for advice on entering the market. Why is this? Trading revenues have been excellent and fears surrounding supply exceeding demand have proven unfounded. The success of the regional air carriers, improving stay lengths and a greater proportion of air passengers specifically visiting or stopping over in Dubai have made a significant positive impact on trading numbers. It is, however, the spending capacity of the resident population which has surpassed expectation. Buoyant immigration will continue this trend for the foreseeable future.
But successful retailing is also complicated. Customers are fickle and fashion-conscious. They are interested in new offerings and often unwilling to travel short distances to a particular location. Successful retailing is about complementarity of brands; a good tenant mix and above all about creating a reason to visit. Sometimes this reasoning is convenience; sometimes it is for the experience; sometimes just to visit a particular shop.
From an occupier's perspective, retailers may open units to enhance brand awareness, but ultimately they are really only interested in expanding their footprint to increase revenue. Retailers do therefore have a finite appetite for expansion and will pay very close attention to any dilution of retail spending.
The concept of Dubai as a retailing hub is strongly underpinned with world-class shopping facilities and development schemes. It is, however, likely to become an increasingly competitive market and one in which some mall owners may find it difficult to compete to attract popular retailers. Careful planning and rigorous feasibility research will be required for new projects and close monitoring for obsolescence for existing schemes is now vital to protect the heath of the sector.
All professionals who have a hand in developing or providing advice in respect of retail schemes have a responsibility to ensure that Dubai's retail sheen is not tarnished by oversupply.
Nick Maclean is managing director of CBRE Middle East
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