Malls on the line
For a country known for its love of conspicuous consumption, Lebanon has surprisingly few malls. But will the new wave of openings prove to be overkill?
February 10, 2010 9:45 by kippreport
For a small country with a limited retail market and an uncertain political climate, Lebanon knows how to attract investors. In the coming years seven new malls are scheduled to open, all vying for a share of the market against many established competitors.
So will this influx of new retail space fill a gap in the market or will it eat into what is already a competitive sector?
The biggest project planned is Agora mall, which will be located in Hazmieh, in eastern Beirut along the Damascus highway. The UAE-based Majid Al Futtaim Group is building the project around a Carrefour hypermarket, the first to be opened in the country. Al Futtaim has also acquired land on the Dbayyeh coast, where it plans to construct another mall in the next few years.
In 2011, the Acres, the development subsidiary of retail giant Azadea, is expected to open Le Mall in Dbayyeh, located on the international highway next to the existing ABC department store, which also has expansion plans. The expanded ABC will also include a cinema complex, scheduled to open later this year. Acres is also opening Le Mall in Saida this year, where it will soon be joined by a second mall to be developed by Retail Group.
Various companies, including Acres, are studying the possibility of opening a mall in the northern city of Tripoli. And then there is the Verdun 5 project, which has been delayed, but will apparently still be built. With all these projects coming up, some observers might expect a certain saturation of the Lebanese retail environment to take place, but those in the sector, not surprisingly, are very optimistic about the new openings.
Guillaume Boudisseau, a real estate advisor at Ramco Beirut, says that malls are a relatively recent phenomenon in Lebanon and developers are careful to spread their projects out geographically. “The first mall to open in Lebanon, ABC, is only four years old, and the others are even more recent. If you compare the situation with Dubai, for example, where there are malls every few miles, you can see that there is a lot of space left.”
Charles Arbid, president of the Lebanese Franchise Association and CEO of retail chain Rectangle Jaune, says that Lebanon’s small domestic market, which he estimates at some two million potential customers with sufficient buying power, should be added to the large number of tourists visiting every year.
“Don’t forget that in 2009 we had two million people coming in, a marked increase compared to last year. If the situation keeps developing positively, that figure might double in the next few years. I believe we have the capacity to attract up to four million tourists annually, which would double the existing market and consequently make it possible to double the mall area.”
He says that although tourism is currently a seasonal phenomenon, the franchise association and its partners are working on developing a year-round tourist market, organizing events such as fairs and exhibitions outside the summer season to attract visitors throughout the year.
Naji Mouzannar, a member of the board of directors on the Beirut Chamber of Commerce, sees the malls as an integral part of former prime minister Rafiq Hariri’s plan to reconstitute Lebanon as the hub of the Middle East, with free market policies to further develop the country’s retail market and its potential as a tourist destination.
“The Beirut Souks, for example, were an integral part of the reconstruction plan for downtown,” he says, referring to the city-centre mall recently opened by Solidere’s, which is owned by the family of Saad Hariri, the current Lebanese Prime Minister.
“As Hariri’s project continues to be implemented, I think we don’t have anywhere near enough malls and retail outlets yet. The Lebanese are consumers - we shop much more than most of our neighbors – and combined with regularly returning expats and increasing numbers of Arab and other tourists, the retail market is much bigger than could be assumed from the population figures.”
Mouzannar also says that the region tends to view Lebanon as a trendsetter. “Trends in fashion, consumption, or lifestyle adopted first by the Lebanese are then copied in other Arab countries, making Lebanon a test market for the region.”
This may be true, but is there not a danger of overkill? Can the local economy sustain the thousands of square meters of retail space that is set to come online in the next few years?
Tania Ezzedine, ABC’s Marketing Manager, sees no major issues with the opening of Le Mall next to the ABC department store in Dbayyeh. “Le Mall and ABC target different audiences. Le Mall attracts a younger public, with trendy brands and high street fashion, while our outlet in Dbayyeh is more of a department store than the mall in Ashrafiyyeh.”
As long as every mall positions itself differently, offering a mix of brands, hospitality outlets, and entertainment that is different she claims to see no problem.
“In Dbayyeh, the catchment area is quite large, as you have both the traffic from the north and from the Metn coming in. Due to the traffic congestion, these people prefer to stop at Dbayyeh rather than drive on into the center of Beirut.”
Arbid believes that the more distant prospect of the huge mall planned by Al Futtaim on the coast nearby should not create competition, as the combination of Le Mall and ABC “will form an attractive specialty mall.”
Boudisseau agrees that up to now the various malls have been positioning themselves carefully both geographically and commercially, but fears that with new projects closing in on the existing ones – he mentions Agora moving in very close to Le Mall in Sin el Fil, “the big ones could start eating the smaller ones.”
He says as does Arbid, that Khalde or Jnah would provide more desirable locations, as there are virtually no malls serving southern Beirut yet – Beirut Mall being a relatively small affair, with a Farma hypermarket and a few retail outlets.
“This was the idea behind the Verdun 5 project,” Arbid says, “but it is currently not clear whether and or when it will go ahead.”
The malls opening in Saida will relieve some of that pressure, but as for other areas of the country such as Zahle in the Bekaa valley or Tyre in the south, “they are not ready yet,” says Arbid.
Roger Kamal, CEO of Acres agrees with this assessment. “There is not enough buying power in these places, and the people with money are not necessarily interested in the same fashions as people in Beirut.”
And those who do follow the Beirut consumption pattern are in the habit of driving to the capital for shopping, and it remains to be seen whether this will change, despite new mall openings.