Dubai: Landlords in Dubai may be more willing to listen to their F&B tenants and even accommodate them on rents. This would have been quite unthinkable even a year ago.
In fact, “rents in retail locations (non-prime) are already witnessing a softening, and this is expected to continue,” said Rafat Hodroj, General Manager for F&B at GCP Group and operator of the Big Ben quick-service outlets. “We expect between a 5-15 per cent reduction.
“The prime areas and Tier 1 malls are more difficult to forecast; in any event, any reduction there — if at all — will be considerably less.”
For all intents and purposes, rents in the retail sector could do with a bit of cooling off.
They had been on an upward curve for the last five years and what had cut retailers and F&B businesses was that, even last year, most of the prime retail destinations enforced increases despite the general market sentiments being quite weak.
The cost of doing business has already led to a high “attrition rate” in the local F&B sector, according to Matthew Green, Head of Research at CBRE UAE.
“This is further exacerbated by rapidly rising supply levels and the presence of high rentals across Dubai’s prime retail and hospitality spaces.
“However, with market conditions weakening over the past year, there is evidence of declining rentals and increasing flexibility from landlords when negotiating new contact terms.”
But even dropping rents by a few percentage points will only be a partial solution for F&B sector’s weak growth curve.
“I am paying less in Covent Gardens in Central London than on the Boulevard on a per square metre basis,” said Naim Maadad, CEO of Gates Hospitality.
“Footfall and volumes globally are non-comparable to the UAE’s population. “It should be about allowing the tenant more control over how they spend money and in Dubai the prices are high everywhere and not just on the obvious locations. It would be great to see deals being made to get new locations off the ground.”
According to Maadad, rents should be linked to turnover and come with enough flexibility built-in.
For instance, rents should not be uniform between the front- and back-end of a property, or if on the terraces.
And “operators should not have to compete with government bodies,” said Maadad.
“Like it is done globally, a successful destination works on complementing the retail mix based on a formula where shoppers can eat among many other activities. This will prolong the time shoppers spend in a destination and will attract more than just foodies. The cuisine mix also should be balanced so operators complement one another rather than simply competing against one another.”