Put on your seatbelts, here we goJune 23, 2015 9:00
Are the Gulf’s over-the-top retail centers doomed? Trends magazine reports.
April 11, 2010 4:20 by Emily Meredith
Middle East-wide, Al Shaer says he expects retail spending to normalize by the end of this year, but the problem is far from over in the region.
Residents of the Middle East collectively have the highest per capita income in the world, according to the chief executive of Aswaq Management Services in Abu Dhabi, Jean-Herve Bouyer. In the last few years, spending habits have changed dramatically: Annual consumer spending in the region doubled to $3,200 in 2008 from $1,600 in 2004, according to Bouyer. Even with the considerable drop witnessed in 2009, spending levels still far outpace historic trends in the region. But in order to sustain all of the retail real estate slated to come on the market this year in Dubai, average annual consumer spending needs to hit $7,100.
He is careful not to say that any one place in the region has an oversupply, but the numbers are illustrative. Bouyer says stabilized urban markets have an average gross leasable area (the measure of space in a retail property that can be rented to sell goods) of 14 square feet per capita. If all of the Dubai developments scheduled to open in 2010 succeed – an awkward prediction because figures include the Mall of Arabia, which Bouyer doubts will be delivered on time – the city will have 24.7 square feet of leasable area per capita.
Ideas about the upper limit of leasable area in a city differ. “Globally, the U.S. is seen as the most mature ‘mall’ market and therefore we often quote the U.S. gross leasable area per capita figure of 2 square meters (21.7 square feet) as being the point beyond which a market shouldn’t build or develop,” the head of retail at Dubai-based consulting firm GRMC, Neil Tunbridge, says. “With recent developments in the U.S. hinting at extensive ‘demalling’ – slang for the process of old and tired malls being converted into new asset classes – and vacancy rates on the rise, this figure may be too high of a benchmark.”
It’s not only mall owners who are responsible for the size and scope of mall retail space in the region. “Seventy percent of the brands are operated by 30 percent of the master franchisee or retail operators,” says Bouyer. “That brings the situation into a monopolistic one.”
Bouyer says the typical size for a regional mall in Europe is 540,000 to 645,000 square feet. But shopping center developers in this region and particularly in Dubai face pressure to increase the size of their properties; small retailers are wary of committing to a mall unless the large brands have signed on.