Leasable retail space in Dubai will soar in next three years

Dubai: Dubai's older and smaller shopping malls will feel the pressure of a decline in rents as the city creates more than two million square metres of additional leasable area within three years, a real estate consultancy said.

The availability of shopping mall retail space in Dubai is expected to exceed four million square metres in 2010 compared with about 1.8 million square metres now.

In a report, Colliers International said: "This massive increase in the supply of retail space is likely to result in a short-term oversupply in the market. Smaller and older malls are likely to experience sharp increases in vacancies, coupled with downward pressure on rental rates."

Dubai is building large shopping centres in its efforts to become a shopping and tourist destination. The UAE ranks second globally after Hong Kong in recreational shopping, according to a survey.

These mega malls will "firmly entrench Dubai's dominance in the retail industry throughout the GCC," the report said.

Abu Dhabi scenario

In Abu Dhabi, the gross leasable area (GLA) is expected to increase from 526,700 square metres at the end of 2006 to 1.4 million square metres by 2010.

The report said Abu Dhabi will need an annual per capita spending of $4,900 to support the per capita GLA of 0.87 square metres.

The city lacked 'destination retail venues' until 2001, when Marina Mall and Abu Dhabi Mall opened, contributing a GLA of 139,000 square metres.

With 223,000 square metres of GLA, Dubai's Mall of the Emirates is currently the largest shopping centre in the GCC. But it will lose its status when the Mall of Arabia's first phase opens with a GLA of more than 400,000 square metres in 2010.

Dubai Festival City has an estimated GLA of 195,000 square metres and another 58,000 square metres is under construction. The Dubai Mall, part of the Burj Dubai development, is expected to offer around 344,000 square metres of GLA.

Growth in population and rising tourist numbers should sustain demand for all types of retail space, but large and modern malls will see high shopping visits.

Softening rentals

"Older malls will be forced to review their viability, and look at repositioning themselves to appeal to specific market segments.

"New, larger malls with strong tenant mixes, should be able to maintain current absorption rates, but with reduced demand, could experience a softening in rentals," Colliers International said.

The report said Dubai is working on a "quite elementary" equation of "fly in the tourists and let them shop," and has developed a successful marketing campaign that promotes the city as a leisure and shopping destination.

Dubai holds two major shopping events each year, the Dubai Shopping Festival (DSF) and Dubai Summer Surprises.

About 3.5 million visitors spent Dh10.2 billion during 45 days of the last Shopping Festival, according to official statistics. The next edition of the DSF will start on January 24 and run until February 24.