Secondary malls ‘will come under pressure’

New high-end malls and competition from online shopping will be steep hurdles: Alpen

Dubai’s second-tier shopping malls had better watch out – they will be the ones facing the most intense pressure on occupancy and rentals when the next set of mega developments opens within the next four years.

And Abu Dhabi’s retail space should be the next to reach a similar saturation point, according to a new sector update by Alpen Capital.

But elsewhere in the Gulf – and particularly in Saudi Arabia – it could be quite awhile before brick-and-mortar capacity reaches an upper limit, the report adds. “In cities like Jeddah or Dammam, the per capita retail leasable space [as of 2015 estimates] is 0.23 and 0.48 square metre as against Dubai’s 1.26 and Abu Dhabi’s 0.95,” said Mahboob Murshed, Managing Director, Alpen Capital (M.E.) Ltd.

“That still leaves a lot of headroom for new capacity.” [In the US, the per capita retail GLA is estimated at 2.14 square metres.] “But we believe Dubai is reaching a significant saturation point, and secondary malls are suffering quite a bit in terms of vacancies. When new malls open, they soon emerge as must-visit places for shoppers. And the existing top malls continue to see a rise in rental terms.” Simultaneously, secondary malls become less of a vital cog in retailers’ scheme of things. This then represents the biggest threat to the retail sector as vacancies pile up in Tier-B retail assets.

But what of the threat from online shopping? Will brickand-mortar in the UAE and other Gulf states go the US way, with older shopping centres facing low vacancies or closures? While in the UAE, online shopping penetration has gone past the 50 per cent mark, in other Gulf states that would be 10-15 per cent. Alpen is fairly bullish on the Gulf’s retail sector prospects for the next three to four years, which it says has to do with the rise in population especially that of the young.