The Dubai Retail Real Estate Market Prediction vs Reality for 2015

Demand for Dubai’s retail sector was strong in 2014 driven by growth in spending, a relatively large demographic of young affluent adults, increasing tourist demand, and growth in GDP. The Dubai Mall attracted a record 80 million visitors in 2014 and retailers experienced 14% growth in sales compared to 2013, accounting for approximately 5% of Dubai’s GDP.

The Beach, at Jumeirah Beach Residence, launched in 2014, and City Walk (Phase One) saw a number of new outlets open during the year, including brands from outside of the GCC. Both of these schemes are outdoor lifestyle destinations offering a mix of retail, F&B, wellness and entertainment. Nakheel also announced the development of a number of community retail centres in 2014, with Discovery Gardens and Jumeirah Park Pavillion now open.

Two significant retail IPOs took place in 2014 in Dubai. The first of these was Marka, the UAE’s first public joint stock company focused on retail and hospitality investment, and secondly, Emaar Malls Group. These listings mark a key change in retail market sentiment, evidence by significant investor interest in the IPO and over subscription, following a five year IPO lull since the onset of the global financial crisis and political unrest in the region.

Predictions

1.       Retail trends witnessed in 2014 show that consumers are demanding more than just shopping amenity from malls. Retail environments have evolved to integrate wellness, leisure, F&B and lifestyle to enhance the visitor experience and appeal to wider demographics. We predict this trend will continue in 2015 and will differentiate further between prime and secondary malls, especially in the context of large planned increases in supply.

2.       Dubai’s status as a leading retail destination globally is predicted to continue to drive demand from world renowned retailers. Apple has announced that it will open a new regional store in Dubai in 2015, which is expected to be their biggest outlet in the world. We predict additional demand from leading retailers for flagship stores, who have not yet debuted in Dubai.

Reality

The first quarter of 2015 continued to see quiet activity in Dubai’s real estate market. The retail market continues to be constrained by the slowdown in spending, restricting overall growth levels.

The first quarter saw Dubai’s retail market remain largely stable. Despite recording strong annual growth levels, average retail rents registered no quarterly increases. Similarly, vacancy levels remained at 8% as no major deliveries took place, except for the handover of ‘Box Park’ by Meraas. The subdued nature of the retail market comes as the industry copes with a drop in the number of visitors from Russia, while the weak euro threatens visitors from the Eurozone. Performance of the retail market is expected to remain stagnant throughout 2015, following estimates of a slowdown in retail sales growth figures. The latter is likely to put pressure on retailers and squeeze out some of the small & midsized tenants as they become burdened with achieving targets to meet high rents.

 According to statistics issued by Visa, the total Visa card spend in the first 2 weeks of Dubai’s Shopping Festival (DSF) 2015 increased 12% Y-o-Y to reach USD 54 million. In terms of spending growth patterns, restaurants witnessed the largest annual increase; 31% compared to 2014 figures. Predictably, visitors from Saudi Arabia emerged as the top spenders, contributing USD 35 million to the UAE’s economy, and representing a 29% Y-o-Y increase. Given the general stability in the sector, these figures portray the significant impact the event has on Dubai’s retail market.

SOURCE: Roots Land Real Estate