High-street locations back in prominence for Dubai retail

Dubai

Dubai’s retail is hitting the streets ... literally. In the last two years, “high-street” retail locations have emerged as a favoured destination for brand owners and shoppers alike. Look no further than the City Walk and Boxpark for confirmation.

And a high-street ambience is what developers are now inserting into their new mixed-use projects. Nakheel’s Deira Islands will have the “Night Souq” cluster and the retail district at the Emaar sponsored Dubai Creek Harbour could offer many an option on how shoppers — or those just out for a good time — want to spend their time. From Meraas, which built the City Walk, there will be a “low-rise pedestrian strip” at its Blue Waters Island off Jumeirah.

Clearly, these represent radical shifts from the concept that only malls — destination as well as community-themed — can serve the needs of Dubai’s retail sector, one that had been dominant since the mid-1990s.

“Although super-regional malls remain tourism anchors, developers are increasingly becoming aware of changing consumer patterns in Dubai,” states a new report on Dubai’s retail sector by Core Savills, the consultancy. “A shift in development strategy is emerging as new retail formats such as pedestrianised high-streets come into being.”

As such, Dubai needs a more equitable mix in its retail areas, with prime malls currently contributing 95 per cent. That is totally at odds with the retail mix in London or Paris. Creating high-street attractions also suggests that their developers are positioning these as lifestyle options for residents to come to as frequently as possible.

The push towards offering a high-street feel is taking in all sorts of locations in Dubai. According to Core Savills, the “retail spine nearing completion in DIFC is expected to provide better access between towers and integrate the whole precinct”. The “pedestrianization of Palm Jumeirah”, will create an area connected to a growing number of retail, dining and entertainment facilities.

There is the ongoing regeneration across hitherto industrial areas such as Al Quoz, through warehouse conversions into “quirky” art centres, start-up incubators and gymnasiums. Even future malls are getting into a high-street state of mind.

The Mall of the world, still in the planning stages, is looking at temperature-controlled pedestrian retail and cafés.

“Through the development of these pockets of art, design, music, sport integrated with retail and F&B, Dubai is learning to use urbanism as a powerful tool to enhance public interactions through built and particularly open spaces, a shift from its “building big” philosophy,” the report states.

The changes also reflect developer and retailer needs to stay in touch with changes in the shopping dynamic. It represents their constant battle to keep consumers interested and keep them coming for the experiences and not just the shopping. And this is how they hope to stay in contention in the war against online shopping.

“Although trust remains an issue, buying sentiments are changing with access to a much larger inventory of products offered with cash on delivery, which remains the major way online sales are conducted in the region, become available,” states the report. “The online retail remains a sunrise segment in this region, which is yet to impact the market share of the brick-and-mortar stores — albeit for now.”

For existing malls in the city, change is on the cards — in how they are perceived by retail tenants and shoppers. Segmentation will set in more forcefully among them and start impacting the bottom-line.

“Higher performing and lower performing malls (will be) created by a process of natural selection by retailers,” said David Godchaux, CEO at Core Savills UAE. “A gap is anticipated to form between these two sub-categories, reflected through heterogenous rents and vacancy levels — a case similar to Dubai’s two-tiered office market.

“Retailers are expected to optimise footprint and mark a flight to quality towards perceived high functioning malls while the slower performing assets may see a cascading effect of rising vacancy levels caused by this shift.”

Last year was a particularly tough one for the retail sector. Residents were not inclined to engaged in frequent spending on discretionary items, and tourists showed up in high numbers only in the fourth quarter.

The strengthening of the US dollar also makes Dubai an increasingly expensive place to shop for British and European buyers, Core Savills notes. “This is exacerbated for the luxury sector which has started to feel the heat of slowed conversion rates from footfalls to revenue. Steady rents which are yet to reflect these relatively lower margins are straining the ability of a few retailers to pay rent for the prime strips they occupy.”