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Dubai’s retailers: down but not out
The financial crisis is squeezing retailers’ profits in Dubai hard, with many now complaining about their high rents. Are new claims that spending in the city will soon pick up again accurate?
June 10, 2009 4:36 by Aarti Nagraj
Dubai’s retailers are battling tough times, and many may even close if landlords don’t start reducing the high rents, according to Ramesh Prabhakar, the managing partner of Dubai-based Rivoli Group.
Speaking at the Reuters Global Luxury Summit, Prabhakar said that the picture would be clearer after the summer and Ramadan, which ends around September 20. “If it remains at this level of business for the rest of the year … you will see some burnout,” he warned. A reasonable figure for rental costs as a percentage of the topline figure is between 8 to 11 percent, but anything more will be “difficult,” Prabhakar said.
According to reports, retail sales in Dubai fell around 30 percent in the first part of the year because of the financial crisis. Luxury items have seen sales slide by 45 percent. Tourist numbers have fallen, and domestic spending has also reduced drastically.
However the CEO of the Dubai Shopping Festival office, Laila Suhail, has said that she is quite optimistic about the city’s retail sector.
“Dubai is not as over-retailed as it is made out to be. Yes, the city’s gross leasable area is the highest in the region, but this is the dynamic nature of Dubai, and we [Dubai retailers] are pooling our efforts to ensure that the offers put out this summer will be unmatched by any other retail destination,” she said. Around 4000 retail outlets will be taking part in Dubai Summer Surprises this year, where they are expected to offer discounts of up to 80 percent. The event begins June 11.
According to research by real estate consultancy CB Richard Ellis, the UAE came fourth in the list of countries worldwide for attracting new retailers in the last year; 46 percent of the world’s top 280 retailers have a presence in Dubai, it said.
And Dubai is expected to have 4.25 million square meters of retail space by next year, up from 1.17 million sq meters in 2006, an increase of 263 per cent, says Dubai-based research firm RNCOS.
But are the city’s retailers set for a long, grueling summer?