Dubai
In Dubai, a city synonymous with luxury and flashy displays of wealth, standing out at the very top of the market is no easy task.
But with the launch of Dubai Mall’s so-called Luxury Avenue last Saturday, Emaar Malls are trying to do just that, betting that the emirate’s welcoming tax environment and high quality of life will continue to attract high net worth individuals for the foreseeable future.
After many delays, the 150-store expansion opened on March 10, playing home to the likes of Cartier, Rolex, Hermes, and a three-floor, 1,000 square metre Gucci flagship shop.
According to Emaar, the space adds another 304,800 square metres of built-up area to the already vast mall.
Experts were mixed on Wednesday as to whether the opening comes at an unfortunate time given the strength of the wider retail sector and how the expansion fits in with the rest of Dubai Mall’s tenant mix.
“The retail market was in a far better place when this was conceptualised,” said Matt Green, head of research and consulting at CBRE UAE.
But with the pulling power of Dubai Mall, able to attract tourists and local residents alike, he said that Emaar shouldn’t have too much of a problem.
Several analysts told Gulf News that Emaar had already signed up the majority of spaces on Fashion Avenue, moving existing high-end brands in the main part of the mall in to the extension.
“With 98 or 99 per cent occupancy rates within Dubai Mall, Emaar needed the swing space,” Green said, adding that the vacancies in the main mall created by the extension would likely be replaced by non-luxury stores.
That said, Green had a warning for the world of luxury fashion: “The market has softened, and it is a challenging period for fashion,” he said, adding that online retailing would have more of an impact on the higher-end of the market than it would on all other segments.
According to Josh Holmes, a senior consumer analyst at BMI Research, the ongoing rise of online shopping in the UAE poses a risk to brands that become overly reliant on physical stores in the country.
BMI forecasts that the UAE e-commerce market will grow by 27.5 per cent year on year in 2018, reaching $12.3 billion.
Online sales are projected to rise further to $23.3 billion by 2021, with luxury representing a modest but growing share of this.
Another challenge, according to Holmes, is the rise of modest fashion, best known as the modernisation of traditional Islamic attire with the purpose of looking stylish while remaining covered by an abaya.
He said that these cultural differences posed another risk to luxury brands in the UAE, and the wider Middle East region, who could not cater to individual preferences and social sensitivities.
Despite his concerns, Holmes is upbeat about the prospects of the country’s luxury sector: “The UAE is our top pick for luxury spending in the Middle East and North Africa (Mena) region, due to the prevalence of high earners and stronger economic growth compared to its peers.”
Explaining his assessment further, Holmes said that the country was home to a young, wealthy, urban population with a “huge existing demand for luxury fashion products, particularly from Emirati women.”
Dubai Mall is not the only shopping centre to have noticed the potential for luxury fashion: Mall of the Emirates, a Majid Al Futtaim supermall that competes with Emaar’s Dubai Mall for local and foreign footfall, opened its own Dh100 million Fashion District in 2015, adding 30 new luxury brands including Burberry.
In opening a new fashion extension of its own, Dubai Mall is further solidifying itself as a luxury destination in Dubai, according to Colin Beaton, managing director of retail consultancy Limelight Creative Services.
“It’s a logical extension to diversify its tenant mix,” Beaton said, adding: “Even Dubai Mall has to broaden its portfolio to maintain footfall and profitability.”
Nevertheless, the retail market had changed and evolved in recent years, he said.
“I am not sure Emaar would spend the same capital today. The timing is questionable.”
And what for the broader retail sector in Dubai?
BMI sees total household spending rising to Dh692 billion by 2022, up from Dh533 billion in 2018, with growth averaging 7.1 per cent per year over this period, fuelled by an increase in economic growth in 2018, growing by 2.8 per cent, up from 1.8 per cent in 2017. In 2019 this will accelerate further, with the UAE economy set to grow by 3.3 per cent, fuelled by an improved outlook on oil production, according to the research firm.
Beaton and Green, however, have a cloudier outlook for the city’s malls and stores.
With the retail market in a transitional period, and a huge amount of supply coming online (six or seven sizeable malls in the next couple of years), they predict deflationary risks, pressure on rents, and occupancy drops.
