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A crowded mall in Dubai. Retailers in the UAE will be asking shopping mall managements and landlords for a review of their rental agreements in the wake of the coronavirus scare and the blows it has landed on the retail sector. Image Credit:

Dubai: Retailers in the UAE will be asking shopping mall managements and landlords for a review of their rental agreements in the wake of the coronavirus scare and the blows it has landed on the retail sector.

“The (Dubai) Government has announced stimulus measures for businesses; the (UAE) Central Bank has asked local banks to be more lenient on loan recovery programmes,” said a retailer. “(Jebel Ali) Free Zone has cut licensing and admin fees for tenants and others could follow that lead.

“Mall owners in Dubai and UAE should also try and work out some sort of new deal with tenants - UAE retail sector could do with a stimulus. Cutting rents could be a start.”

Asian malls have done it

Last week, a news report out of Singapore that was heavily circulated among UAE retailers said that a leading mall owner was giving its 1,000 tenants special rebates for two months. This was done to counter the sales lost during the worst of the virus outbreak. (The mall owner, CapitaLand, was offering a 50 per cent rebate on the fixed components of their one-month total rent.) Hong Kong mall managements have also joined in giving tenants a cost break - and they have been drastic about it, cutting rents by up to 60 per cent on their February payments.

Start talking

According to George Kunnappally, who heads the F&B brand Nando’s UAE operations, malls in the UAE have not yet discussed with tenants on how best to absorb the virus-fuelled slowdown in visitor traffic and sales.

George Kunnappally

“We will start COVID-19 related conversations with mall landlords in April,” said Kunnappally. “Most landlords will remain supportive as we are long-term partners and work closely with them. We are also paying “turnover rent” at locations where we are doing relatively well - so, it should be a win-win for all.” (Turnover rent relates to a certain percentage of overall monthly sales generated by a tenant. So the mall owner gets the base rent plus the turnover rent percentage.)

Already cut

Whether retailers will be successful in getting a favourable response is to be seen. Malls in Dubai had already brought down rents - on average by 10-15 per cent - last year, to give some relief to their tenants in dealing with the slowdown in sales volumes amidst a tightening economy.

Will these mall owners be able to provide further sops on top of the rental cuts made?

According to one retailer, malls have no options. “No shopping destination in the world has been immune to the virus outbreak and the loss of business,” he said. “There’s no preparing for a disaster such as this.

“The loss of business as a result requires mall owners everywhere to be reasonable. It’s the least they can do. Malls in the UAE were the last to downsize rents in the last four years, even though residential and commercial rentals had dropped significantly.

“Malls must realise they too are part of the same eco-system.”

Random attempts

Bharat Bhatia

There have already been some moves by individual retail landlords to bring down rents in line with market conditions. According to Bharat Bhatia, CEO of Conares, which operates steel mills and F&B outlets in Dubai, “Recently, we experienced support from one of the government departments for our F&B business. And we were able to avail an attractive rental deal for the next three years.

“This type of support will help SMEs and resulting in economic sustainability.”

Maybe, UAE’s retail sector needs more such instances.