Malls in the UAE are working towards a re-opening after the COVID-19 restrictions on activity. But retail tenants hope for more support on the rent side. Image Credit: Gulf News Archive

Dubai: UAE’s residents can now start counting down to the relaunch of their favourite pastime – the opening of malls in the country. Authorities in Dubai and Abu Dhabi have issued guidelines on what shoppers and mall visitors can expect and the precautions they will need to take to keep countering the COVID-19 spread.

The actual opening dates will be confirmed later, but until then, mall managements and retailers have clear guidelines to work on.

What customers should do
* Awareness for customers to pay through smart payments (credit cards/ debit cards over cash).

* Cash payments are still valid and not to be rejected.

* Shoppers must wear mask while trying items. Jewelry items tried by customers to be sanitized properlyor quarantined in case sanitization is not possible due to fear of damaging the jewelry.

* Ensure the 2-meter distancing measure is maintained in all common areas, at service desks and customer service. (This is not applicable to family members.)

* Use no more than 30 per cent of an elevator's capacity.

Retailers seek rent relief

But UAE retailers are hoping something more... from the malls themselves. They want a firm commitment on future rent relief from landlords, as guidelines are issued in Dubai and Abu Dhabi for the restart of activity at malls and shopping centres.

Several rounds of “virtual” talks have been held in recent days between mall managements and leading local retail groups on measures that should be taken once commercial activity commences in the UAE after the rollback of restrictions imposed to tackle the COVID-19 spread.

But these talks have, so far, not yielded any firm commitments from malls in Dubai about what that rental relief could for the immediate future, according to several retailers who participated in these.

“Most of the leading malls in Dubai are even now only talking about delaying/deferring the rent payments for the period during which they remained closed,” said one retailer. “That means they will not be cashing the cheques issued for the period – but that’s only for now. Many malls have also allowed rent relief for the period of closure.

“But most retailers have had zero or limited cashflow during these weeks and are in no position to meet those commitments. The retail industry needs mall managements to realise this – we need rent waivers and not just a delay in presenting our cheques.”

Some retailers have complained that certain malls are still charging them on cooling charges… even for the period when their shops have not been open for business.

What Dubai Government is saying on rents and future activity
* Mall management is encouraged to make retailers pay rental for lease areas in mall based on pro-rata charge for number of hours the store stays opened instead of full-day rental, the statement from Dubai Economy says.

* If retailers have to renew their lease, there should be no increase on rent after renewal.

* Neither mall management nor retailers are allowed to hold sales & promotions during Stage 1 of reopening malls to avoid crowd management within a store.

* Maintain occupancy ceiling to 30 per cent of common areas and gross leasable areas.

* F&B (in case of dine-in) outlets reduce seating arrangements to 30 per cent and maintain placing seating and tables six plus feet apart.

* Stores (and F&B dine-in) to hang red tag at front door indicating maximum number of allowed customers inside. To be calculated based on four feet per customer.

* 75 per cent of the mall parking to be closed.

Who’s offering three-month relief

So far, only Al-Futtaim Group had announced a three-month rental relief at its two “Festival” branded malls, and it will be the same for tenants at Mercato Mall and Town Centre Jumeirah, both owned by Al Zarooni Group. But the majority of malls have only promised rent relief for the period when they were closed. (And there are still those who have not offered anything.)

Al-Futtaim Group, which owns Dubai Festival City Mall and Festival Plaza, offers affected tenants a three-month rent relief. Image Credit: Gulf News Archive

According to Ashish Panjabi, Chief Operating Officer at Jacky’s Group, “I anticipate there will be a gestation period - whether we are working two shifts or as one shift as we were just before the malls were shut.

“For most retailers, the biggest expense is salaries and rents, which are both “sunk costs” at the moment. There is no cash coming in but cash going out to meet these expenses.

“We also have inventory in hand, which is losing value locked inside our shops. The losses from this are difficult to assess just yet.”

Whether it’s electronics or fashion merchandise, carrying unsold stock will be one of the headaches retailers are confronted with. Especially with fashion, even a month can be too long when it comes to what catches shoppers’ eyes. And in a post-COVID-19 world, fashion will not be an immediate priority for shoppers anywhere.

What visitors can't do immediately once malls open
* Closure of all entertainment and tourist attractions (e.g., Dubai Fountain) to restrict crowding.

* No entertainment activities of any kind to be performed.

* Remove public seating

* Clear communication that visitors are allowed to visit the mall for a maximum of 3 hours.

* Maintain disciplineand adult supervision of their children at all times.

* Clear communication on caps of visitors.

The Abu Dhabi way – cut it by 20%

Meanwhile, retailers are looking at the measures offered to the retail sector in Abu Dhabi. Malls and landlords of other retail establishments in the emirate must grant tenants a 20 per cent reduction on their annual rent.

This decision applies to leases “wherever they are located in the emirate” and will cover:

* Restaurants, cafes, cafeterias, and takeaway outlets;

* All real estate units leased to establishments engaged in recreational activities where they exist’

* All rental properties for tourist and leisure facilities; and

* Desert resorts and tourist resorts.

But for the 20 per cent rent relief, the contracts need to be those entered into between October 1, 2019 to March 31, 2020. Or those leases renewed from April 1, 2020 to September 31, 2020.

Abu Dhabi has issued guidelines on what retailers should be granted as rent relief. (Image used for illustrative purposes.)

Online buying becomes a habit

Retailers everywhere are hoping that similar rent relief measures will be introduced elsewhere. No one, including mall managements, expect a sudden rush back of consumers into retail spaces. Plus, it will also be the month of Ramadan, and market sources say only essential purchases will keep happening.

Then again, UAE’s brick-and-mortar retailers will need to compete with their online counterparts to get their shoppers back. Residents have gotten so used to buying most of their needs for online options and it will be difficult to break that habit immediately.

Raising the competitive pitch further, more online shopping options are going live these days.

Not just malls

Retailers fret over what they believe will be long – and painful – negotiations with their landlords once business re-opens. Particularly, those landlords with high-street stores.

“The other big challenge will be high-street landlords as many of them tend to be more difficult to work with,” said Panjabi. “As Dubai Computer Group, this is where we have been focusing and have sent letters to landlords of our member's landlords this week with a copy marked to the Dubai Chamber of Commerce & Industry.

“Many have PDCs (post-dated cheques) in their hands - and while malls are agreeing to defer encashment of those cheques, many high-street landlords have refused. For the SME sector to survive, we need to see some cooperation from these landlords as well.”

No one wants to see a rash of bounced cheques happening because retail tenants just don’t have the funds available in their accounts. Market sources say banks too will need to get active in these talks to offset any spike in bounced cheques.

While malls are agreeing to defer encashment of those cheques, many high-street landlords have refused

- Ashish Panjabi of Jacky's Electronics

What are malls saying?

Malls too will have a balancing act to perform once they open up. Managing their rental income is a priority, and privately they say they can only do so much in these difficult circumstances.

One leading mall operator in Dubai wrote to tenants that “”We will defer collection of rent cheques received from those tenants whose cheques fall due on 25th March onwards and until further notice from the Government. We are very keen on alleviating some of the burdens imposed upon all of us.”

But convincing retailers will remain a hard sell. “The leading mall operators are sitting on cash reserves of Dh6 billion or more… they can afford to be generous on rents. And if not now, when?”