Oman’s retail space needs an equitable mix

The Omani capital Muscat currently has an estimated retail supply of 350,000 square metres of gross leasable space across its shopping malls. This compares to a population of 1.2 million in the Muscat Governorate, which translates into roughly 0.3 square metres of retail space per capita.

While this is similar to the level of retail provision in Qatar, Bahrain and Kuwait, it remains significantly lower than that of neighbouring UAE and, in particular, Dubai, where retail space per capita is among the highest in the world.

The four largest malls in the capital account for 40 per cent of total gross leasable retail area across the city: Muscat City Centre, Markaz Al Bahja, Muscat Grand Mall and Qurum City Centre. The retail sector in Muscat is, however, about to witness significant expansion, with a strengthening pipeline of shopping mall developments.

Of the larger malls currently under construction in Muscat, The Avenue and Panorama Mall, both of which are in Bausher, and the dedicated military personnel mall in Mawaleh are expected to increase the supply of larger scale mall space over the next two years by over a third. In addition, there are currently proposals for three further mega-malls, which would be vast destinations in their own right, akin to what is already on offer in Dubai.

These include Majid Al Futtaim’s ‘Oman Mall’ in Bausher, the Al Futtaim Group’s ‘Muscat Festival City’ in Airport Heights and Al Jarwani Group’s ‘Downtown Muscat Mall’ in Mabellah.

In addition, there is the proposed 50 million Omani riyal (Dh475.5 million) expansion of Muscat Grand Mall, announced last summer. The new extension will provide room for 100 retail units spread across an additional 30,000 square metres of floor space. The plans also include a separate expansion of the existing cinema complex.

While the absence of a high quality retail experience has long been missing in Muscat, the current back log of malls-to-be will certainly put retail rents under strain and also test the market’s ability to absorb the space waiting in the wings.

In an increasingly congested and competitive retail landscape, a clear understanding of the consumer target market and well-matched tenant mix will be the key to success for Oman’s growing list of malls. Our experience shows that higher-end luxury brands have thus far been unsuccessful in Oman.

This is linked to the relatively low levels of disposable income in the sultanate when compared to its Gulf Cooperation Council (GCC) peers. Achieving the appropriate balance between luxury and ‘regular’ retailers will be central to the success of Muscat’s new malls. This was recently evidenced by the tenant reconfiguration exercise undertaken at Markaz Al Bahja. A shift away from high-end retailers with a focus on more ‘value brands’ helped to drive a significant uplift in the footfall.

In addition, we have found that an anchor supermarket/hypermarket retailer almost guarantees a high footfall across the rest of the mall as well. This is a tried and trusted technique across the wider GCC.

Away from Muscat’s looming larger malls, an emerging niche sector that we expect to grow rapidly are neighbourhood malls. The development of these smaller malls has been limited to date; however the scope for a number of these, in the region of 3,000 to 10,000 square metres, bolted on to existing residential communities is tremendous.

The car culture prevalent in much of the region means that malls are often a journey away, so being able to service the needs of immediate surrounding population groups will almost certainly ensure the success of smaller retail schemes.

A good example is the Al Marsa Village Retail Centre at The Wave which is expected to open later this year. The development will be anchored by a 1,500 square metres Waitrose supermarket, four restaurants, three coffee shops, 30 retail units, a gym, several health and beauty service specialists and some limited office space.

With a significant supply of larger scale mall space either under construction or in the pipeline, we would like to see future retail development opportunities being smaller, with a focus on neighborhood malls, which will go some way in helping the ongoing evolution of the sector across the Sultanate.

Credit: The writer is the Middle East head of Cluttons.