With an increasing competitive retail landscape, new schemes coming onto the Dubai market are trying to differentiate themselves by providing amenities and new experiences that are difficult to replicate online.
Dubai - Developers witnessing a returning confidence from retailers both large and small,
The future of the UAE's retail sector looks bright, with developers witnessing a returning confidence from retailers both large and small, as the country makes its way into 2018.
"We are seeing a demand for retail space due to the spending power of residents, anticipated growth in tourism and a growing expatriate population with high incomes, which has in our experience, provided retail tenants with confidence in the market, and from that we're seeing more choice for consumers," said Rami Chehabeddine, CIO at National Investment Corporation, the breakwater developer and owner of Marina Mall Abu Dhabi.
Marina Mall Abu Dhabi, which recently announced a Dh3 billion expansion and upgrade plan, featuring a new waterfront promenade that will start development in 2018, expects the next year to be an exciting one. "With our new expansion plans, we will reinforce our position as a premium leisure and entertainment destination for all ages in the community, providing a complete overall experience that merges retail, entertainment and dining together," Chehabeddine said.
Experts estimate the value of the UAE's retail sector to stand at $56.6 billion at the end of 2016 and retail sales turnover to exceed $71 billion by 2021. Demand within the UAE's retail sector remained steady last year, supported by a 5.8 per cent year-on-year increase in footfall within shopping malls
The retail scene in Dubai was also marked with many new announcements and expansions in 2017, the most notable one being the expansion project at The Dubai Mall that will see additional retail space added to the world's largest shopping. The summer also saw Dubai developer Emaar Properties and holding company Meraas announce plans for a new 11 million sqm mall at its Dubai Hills Estate community joint venture.
"Despite economic headwinds which have impacted many real estate asset classes during 2017, Dubai has successfully maintained its position as the second most important retail hub in the world, behind London," said Matthew Green, head of research and consulting for the UAE at CBRE. "The emirate's retail demand remains heavily orientated towards the major shopping centres, with prime malls continuing to demonstrate high occupancy rates, despite a slight uptick in vacancy rates during the years."
Retail development activity remains incredibly buoyant with approximately one million sqm of gross leasable area set to be handed over between 2017 and 2019. This includes super-regional malls such as the Palm Mall and non-mall retail developments such as Marsa Al Seef and Bluewaters.
The UAE has just under two million sqm of space currently under construction, with Dubai accounting for the majority of upcoming developments in the country. With an increasing competitive retail landscape, new schemes coming onto the market are trying to differentiate themselves by providing amenities and new experiences that are difficult to replicate online. Meydan One Mall, for example, is expected to include more than 100 food and beverage outlets, the world's largest indoor ski slope and a luxury brand quarter.
From an e-commerce perspective, the Middle East is regarded as having one of the most fertile soils, Green noted. "The region benefits from a dynamic young population, high rates of GDP per capita, some of the world's highest Internet penetration levels, and an ongoing surge in connectivity via smartphones and tablets. Consequently, online shopping is evolving rapidly and we expect to see exponential growth in sales volumes over the next five years."
Sanjit Gill, general manager of ICLP, noted that in 2017, the focus was on "bricks and clicks, physical retailers and online giants".
"Today consumers want real engagement from brands and seamless experiences, their preferences remembered and to feel valued by their chosen retailer," he said.
"This is more easily achievable in the online world, where data can be optimised to make experiences quicker and better. However, the GCC is unique; shopping is experiential. Malls are both social spaces and entertainment destinations. Physical stores here are perhaps more resilient against the online retailer's might than in a Western economy. There is still an opportunity to bridge the gap to meet demanding consumer expectations if the bricks get the most from the clicks."
In other words, retailers need to ensure that their multi-channel customer experience is remembered, rewarded and refined each time a customer visits their physical or online store.
"Physical retailers have an advantage; it's easier to use data and information in a more sophisticated way to bring all the benefits of the online world to shoppers than it is for online giants to become more experiential," Gill said.
Next year will also see another interesting dynamic being introduced into the market, with the arrival of value added tax. Gill says that it will be interesting to see how retailers will react.
"Are we going to see them play with margins to offset price increases? No doubt we'll see retailers vie for share of wallet, particularly the non-essential segment. Take consumer electronics for example. According to Euromonitor International, consumer electronics are predicted to be hardest hit by the introduction of VAT. Recent ICLP research across the UAE found that electronics retailers are leading the way in building loyalty with shoppers," he said.