Reformatting of aspirations leads to optimism

Dubai: Even as the residential and commercial categories are still recovering from recession, retail is riding to the rescue of the local real estate sector.

There was a strong finish to the year gone by with the major retail houses consolidating their locations and new entrants to the market starting to take up the additional space. The reformatting of retailer aspirations to be more in sync with the present market requirements is what is leading to the return of optimism.

According to a new Colliers survey, 93 per cent of retailers who were polled expect a market recovery in the next six to 24 months. At the same time, "Retailers' business expansion plans are not however only focused on increasing the number of retail outlets, but also on reviewing business strategies.

"The survey results indicate that retailers have, in the economic downturn, developed an increased awareness of consumer attitudes and purchasing patterns. They are shutting down brands that fail to perform in a given market and replacing them with new products/brands that are closer aligned to consumer demand in terms of both need and price point."

While retailers have already worked out what they should be doing, and implemented the plans in most cases, mall operators following suit.

"Older malls have to go through a steep learning curve because the traditional ways of conducting the retail business are gone… forever," said a retail analyst. "If they are only intent on piecemeal changes to their strategies, it's not going to work.

Quick exit

"Retailers are making a quick exit from those malls which they feel are not responding to their issues. The older malls are the most at risk from this outflow."

There are no such concerns for the leading lights in the local mall space. "The Mall of the Emirates, Dubai Mall and Deira City Centre were the most popular developments among retailers for future brand expansion," said the Colliers report.

"Abu Dhabi's forthcoming shopping mall pipeline has also generated interest among retailers seeking to expand their current retail franchise stores.

Market positioning

"Until recently retailers were inclined to open outlets in whichever mall they were able to secure space, with little consideration as the market positioning of the mall, or their store location or closeness within the mall.

The downturn has seen retailers advance to a greater level of discernment in terms of the malls that they select to position themselves in. Having decided that they want to be in a specific mall, they are now paying more attention to the location of their unit within the mall, sight lines and adjacencies etc."

Easier norms

According to the Colliers data, 30 per cent of retailers in Dubai had their rents reviewed downwards in the past 12 months, while only 7 per cent have experienced increases. On average, the decline ranged between 20 and 60 per cent.

In Abu Dhabi, retail rents were more stable, with only 17 per cent of retailers having had their rents reviewed downwards, the Colliers report said. "On average, rents were reduced by10-20 per cent," it added.

"With the swing now towards a tenant-oriented market, shorter lease terms, break clauses and rent-free periods are becoming increasingly common. However Colliers is expecting a shorter period than expected. It should move to a position of greater parity between quality landlords and quality retailers."