Dubai: Saudi Arabia’s shopping centre developers are not about to let anything break their strides — be it the spread of e-commerce or the growing competition that UAE-based mall operators will soon unleash in the kingdom. In fact, they are meeting these challenges head on.
For the kingdom’s largest mall operator, Arabian Centres, that means doubling down on an already immense retail stock. It currently operates a quite mammoth 950,000 square metres of gross leasable area across its 19 malls (with the latest one opening on October 1). And to this tally, it will be adding 10 malls — and another 1 million square metres — by 2018. And none of these are anywhere close to being called small.
Even in Tier 2 locations, “We will be building 50,000-60,000 square metre shopping destinations that are huge for those cities,” said Khalid Al Jasser, CEO of Arabian Centres, part of the Fawaz Alhokair Group and operator of the Mall of Arabia in Jeddah and Riyadh’s Al Nakheel Mall. “Just because they are smaller cities, our new malls will not shrink in size. Retailers are interested in coming to these locations and tapping the consumer there.
“And we are mixing shopping and entertainment options whereby the footfall we attract will want to spend time at a fine dining restaurant inside the mall than at one on the high-street.” (As of now, the mall operator represents around 10 per cent of Saudi Arabia’s organised GLA (gross leasable area).)
The prospects that Al Jasser cites are also the ones that the UAE’s largest mall operators are going after. The Majid Al Futtaim Group has three mega projects in the Kingdom, while Al Futtaim Group is creating “Festival City” branded destination in Riyadh.
“The way I see it, it’s a compliment to Saudi Arabia if these investments are coming from outside the country,” said Al Jasser, who was a banker before he took on the new role earlier this year. “It will improve the competitive levels and that can only lead to improving the overall quality.
“With more and more of new shopping destinations being created in Saudi Arabia, the question of local shopping versus doing so in London or Paris becomes irrelevant. Why would any Saudi shoppers stand in long queues on their foreign trips to get a tax refund on their shopping? In 90 per cent of the instances they don’t get the refund because the process is too long. So much so, I wonder whether it’s deliberate (on the part of the authorities there).
“And it’s not cheaper buying abroad — add up the hotel rates, the airline tickets and it can be quite expensive. It can easily be done shopping in Saudi itself.”
Apart from the 10 already in the pipeline, the developer is weighing its options to launch additional ones. The current economic environment in the kingdom — and its impact on the retail sector in particular — is not forcing Arabian Centres’ management to slow down in any way.
“We have been in this business for 15 years ... we do know what we’re doing,” said Al Jasser. “Others can make the decisions for themselves as to what they want to do. Certainly, we will look at cost efficiencies where possible. But it will not be on the construction parameters, but from a mall operating point of view.
“We are not conservative when it comes to raising debts for projects. The scale of the projects means we need all the financing we can get.”
On whether another 1 million square metres wouldn’t be too high for just one developer to offer, Al Jasser said: “We have more than 130 million people visiting our malls a year — that’s more than the combined numbers who visit France and Spain. Sure, mall rates will change with the economy, but we are the largest mall operator and growing in double-digits on all aspects.
“Joint ventures (with other Saudi entities) is an option ... but we will always put our own interests first.”