Dubai: Retailers in Dubai are now focusing more on the needs of residents instead of visitors as they shun luxury and return to the basics.
Most malls had been developed on the back of Dubai's status as a global trading hub, replacing souqs and single shops with great success. However, since the global downturn hit, the mall retail spree has clearly been tamed.
"Of course we enjoy popping over to the bigger malls, but we need some convenience stores in our neighbourhoods. All we have is one or two and they charge astronomic prices," said Siham, a resident of the Palm Jumeirah.
Jones Lang La Salle's Mena House View this month focuses on just that. It reckons that Mirdif City Centre will be the last big mall to open for a while.
The first phase of the gigantic Mall of Arabia in Dubailand is now not expected to open until 2013.
Community focus
The consultancy instead sees opportunities in the area of community-led retail development, an existing concept but not uniform depending where one lives in the city.
"New market entrants into the region will spur growth in the development of smaller malls with convenience and service [being] the focus," said David Macadam, head of retail at Jones Lang LaSalle Mena.
Will this signify the end of its larger cousins? Not likely. For one, large malls are not only about shopping but entertainment drawing in the punters.
If the shopowners get it right, window shopping can be easily turned into unplanned buy.
"For the remainder of 2010 and beyond, Dubai's retail market is likely to shift with the mainstream global market through an increased emphasis on competitive pricing, creative marketing, convenience shopping and value for money," Macadam said.
Visitors to Dubai, expected to increase by 5 per cent this year, would equally appreciate not to be seen as walking ATMs. But not all of them can afford so-called luxury products.
"Dubai really mirrors the rest of the world, the local market is still here but the tourist market, including Eastern Europe for example has less money to spend on luxury products," says Mark Morris Jones, CB Richard Ellis retail director.
Although the enthusiasm displayed by consumers during the Dubai Shopping Festival may have turned fortunes around, sales figures over the next two years are unlikely to get back to where they were.
The Dubai Chamber of Commerce and Industry predicts retail spending to increase by around 4 and 8 per cent in 2010 and 2011 respectively.
This doesn't make up for the 20 per cent dip in sales last year reported by retailers and mall owners surveyed by the consultancy.
But does it really have to? Mall owners can cut costs managing their buildings more efficiently.
The need for retailers to attract consumers, and mall owners the retailers, comes with a welcome side effect — better services for all.
"Owners are becoming more amenable to retailers' requests for more flexible lease terms, including shorter-term leases, break-lease clauses, percentage-of-sales-only rents and rent-free periods," Macadam said. He expects the trend to continue right through to next year.
However, this only affects start-ups or those businesses having to renew their leases.
Retailers are usually locked into rents for a period of three to five years and even ten years. Their sales volume, rather than rents, will determine their fate.
"Rents are a factor of the retail property market; what retailers will pay, and what landlords will accept. Rents are not a function of cost," explains Jones.
Furthermore, developers will simply make more or less profit depending on how much they spent on construction of their mall at the time. "Costs of construction move, but very expensively-constructed buildings do not necessarily drive higher rents — rents that retailers are prepared to and able to pay are decided by the trade that they are able to do at the till: that has no bearing on the cost of the structure where the shop happens to be."
Are there enough places in the UAE to shop? Or do you feel you are spoiled for choice? Would you prefer to shop in a neighbourhood mall or at larger ones?
