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DUBAI: Anecdotal evidence suggests that retail sales in Dubai are beginning to recover, according to Jones Lang LaSalle’s (JLL) MENA House View report for April 2010.
The report quoted the Dubai Chamber of Commerce’s data indicating that the total retail spending in Dubai is expected to increase by around 4% in 2010 and by more than 8% in 2011.
Meanwhile, the tourist sector will continue to be a significant component of retail spending, with a forecast increase of 5% in visitor arrivals in 2010, reported JLL.
Even though the Dubai retail market did not register the same levels of performance decline compared to the other sectors in Dubai’s property market, it is still undergoing a period of transition.
For the past decade, much of Dubai retail offer was targeted at attracting tourist spending. However, the global recession has impacted Dubai’s reliance on wealthy tourist and expatriates to fuel its retail market. Local residents’ purchasing power over the past 18 months has also been reduced significantly.
Retailers and mall owners reported a 20% decline in retail sales in 2009 with a shift away from luxury driven retail towards more value-focused offering in food and non-food sectors, said JLL.
JLL also reported that since 2006, the total stock of quality retail space in Dubai has increased from 15 million sq ft to 24 million sq ft. As a result the market has become more competitive with the level of retail space per capita increasing to 13.3 sq ft from 10.5 sq ft in 2006.
“In this competitive environment, owners are becoming more receptive to retailers’ requests for more flexible lease terms including break lease clauses, shorter term lease, rent free periods and percentage of sales only rents,” the JLL report stated.
These tenant-favorable conditions are expected to continue to characterize the market through to 2011. However, much lower levels of expected future supply will enter the market during 2010 and 2011. This will allow the market to absorb the high levels of supply seen during the last few years.
The year also marks the end for an era of wide-scale development of super-regional malls in Dubai. The opening of Mirdif City Centre on March 16 is likely to be the last of its kind, at least in the short to medium term as this market sector approaches saturation, according to JLL.
Mirdif City Centre was developed by Majid Al Futtaim Group (MAF) and boasts a gross lettable area of 2.1 million sq ft.
