Dubai’s Retail Philosophy: “Build what they want and they will come”
24 Jul 2017
As the market expands in terms of population, tourist numbers, and airport arrivals – Dubai still sticks to its philosophy of “Build it and they shall come”. However, now the government and its subsidiaries are focused on strategy and planning before committing themselves to another “superlative” development. Thus, their newly tweaked philosophy is “Build what they want and they will come”.
Source: MECSC,DSC, PKF Research
Note: Emirate of Dubai split into 9 sectors as defined by the Dubai Statistics Centre.
This holds good even for the retail sector that has witnessed tremendous growth in mall Gross Leasable Area (“GLA”), footfalls and retail potential.
In 2016, Dubai’s total retail GLA per capita stood at 1.38 m2, with the mall GLA and population growing at 18% and 10% respectively from 2015.
Key mall based projects more than 300,000 m2 in GLA which are set to enter the Dubai market by 2020, include the Deira Islands Mall (371,000 m2), Mall of the World (350,000 m2 Phase 1 of 4 Phases) and Meydan One Mall (341,000 m2).
With multiple mall developments announced, along with super-regional and regional malls, the sector also shows growth in numerous community and neighbourhood malls. These malls are located within and aimed at various freehold residential districts catering to the captive population in each of the developments.
Source: MECSC, Press Articles, PKF Research
By 2020, the Dubai emirate population is forecast to grow to 3.39 million.
Predominantly driven by the influx of malls - approx. 2.4 million m² of mall GLA – the total GLA per capita is expected to increase to 1.85 m², whilst the mall GLA per capita will equate to 1.58 m² during the same period.
Source: MECSC, DSC, PKF Research
As supply increases, this new space will create an opportunity for brands to expand into relatively lower rental rates. Additionally, it will assist in creating a fast track entry for new and local brands that have been subjected to long waiting periods in larger malls due to low vacancy rates and high rental.
Source: MECSC, DSC, PKF Research
Overall, the Dubai retail market is set to grow exponentially as developers’ face-off strategically to get a meaningful share of the retail pie.
The trend of being the tallest, biggest and longest destination is of the past, while the present shifts towards providing the best, greatest and unique destination.
That means a significant emphasis in malls is now family led entertainment rather than “hardcore” retail.
The majority of developers are turning their primary focus to stand out amongst their competitors by positioning themselves strategically and creating a destination appeal that never loses steam.
Apart from the supply risk that an increase in malls will suffer a corresponding fall in footfall, Dubai is also preparing itself for the increase in online shopping which – whilst not so much impacting tourism footfall in malls – does increasingly threaten residential footfall.
Thus, by offering more family and general entertainment attractors, the primary reason for footfall (entertainment) will potentially result in secondary motives bringing shopping activity (the “whilst we are here” factor).
If successful, this extra footfall will support the ongoing frenzy of development and translate to an economic growth that will in turn create employment opportunities, increase and expedite infrastructure development, attract additional investors, thus further cementing Dubai as a global brand – and create more footfall as the population grows further.
The author, Mr. Jobby M. Rajan is a Consultant at PKF The Consulting House, Dubai and the Retail management consulting expert for the MENA region. He can be contacted at: firstname.lastname@example.org
PKF The Consulting House are business advisors to the hospitality, tourism, leisure and real estate sectors based in Dubai and operate under the oldest established brand name in the industry. Their services are focused on the needs of owners, investors and developers of hotel and tourism related real estate projects, which very frequently have an extensive retail component. Core services cover real estate strategy, feasibility & market studies, business valuation, operator selection and fully-fledged project development management. For more details please click www.pkf-tch.com.