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Institutional investors target Dubai’s retail sector

They have now taken stakes in a couple of malls and providing welcome funding

Image Credit: Virendra Saklani/Gulf News Archives
Shoppers at Deira City Centre. Despite the constant talk about oversupply and competition from online shopping, interest in malls shows they are still giving investors ample returns.
Gulf News

Dubai: There is a new type of investor interested in Dubai’s malls — the institutions coming with their deep pockets. And for the brick-and-mortar retail space in the city, this interest is quite a timely one.

“Emirates Reit holds Le Grande community mall in Dubai Marina and ENBD Reit recently acquired Souq Extra Retail Centre in Dubai Silicon Oasis,” said David Abood, Partner at the property services firm Core.

“Although most mainstream retail stock is still held by state-backed developers, we are starting to see community retail gain interest from institutional investments.

“We expect this trend to continue, with well-performing community retail centres with mid-tier brands and established catchment areas to achieve steady yields.”

Until recently, institutional investors had been more content picking up hospital and school properties for their property portfolios, as well as the odd commercial or residential tower.

For these investors to get into retail assets shows that the sector can still provide the longer term returns that interest this type of buyer, despite the constant talk about oversupply and competition from online shopping.

According to the Core report, total gross leasable area in Dubai could add 1.4 million square metres (16 million square feet) in the next three to four years. In various stages of development are “Al Khail Avenue, Nakheel Mall, Dragon City, Deira Mall, Deira Islands Night Souk and The Wharf”. And that is just from one developer — Nakheel.

Of the existing ones, “Prime and super-regional malls saw comparatively steady footfalls, allowing mall operators to maintain relatively steady occupancy around 90-95 per cent, and to resist lowering lease rates considerably,” the report adds. “However, community malls and new retail developments in upcoming areas continued to see slow traction, pressing mall operators to offer additional incentives to attract tenants.

“Average occupancy in established malls across this subsegment fell to 80-83 per cent.”

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