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Retail in the GCC: The growth of shopping malls

by Neha Bhatia on Jul 19, 2015

UAE has led the growth of shopping malls in the GCC.
UAE has led the growth of shopping malls in the GCC.

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“Malls anchored by hypermarkets and supermarkets are less vulnerable to economic swings than luxury fashion, jewellery and other discretionary items,” Stephanie-Alexandra Charter, marketing director at McArthur + Company says.

“It is essential to deliver the correct mall to the [relevant] market. The mall project must reflect the needs and aspirations of the target consumer market, like any other product.

“Developers who plan and execute well are typically the most profitable. Large firms select mall projects based on the quality of the potential investment return,” Charter continues. 

One developer which seems to have rightly predicted the profitability of its malls is Emaar Properties. The company reported the revenues of Emaar Malls, a company it launched in 2014, increased by 21% to $1.4bn ($1.2bn). The company reported net profit worth $118m for Q1 2015.

“Our malls business is a strong contributor to Emaar’s recurring revenues. Following its successful IPO and listing on the Dubai Financial Market, Emaar Malls is now focused on its next level of growth through aggressive expansion in Dubai and international markets,” Emaar chief Mohammed Alabbar said at the time.

“The robust performance of Emaar Malls’ assets in Dubai during the first quarter was led by the positive growth of the city’s retail sector, which was catalysed by the Dubai Shopping Festival, the growth in tourism and round-the-year activation initiatives in The Dubai Mall,” Alabbar added.

Emaar Malls is carrying out one of the two large mall expansion projects currently underway in Dubai. The firm is expanding Dubai Mall’s Fashion Avenue by 9.2ha (1m m2), and the project is expected to be completed in 2016.

Mall of the Emirates is also undergoing expansion works in Dubai. O’Leary, having managed the project through Faithful+Gould for developer Majid Al Futtaim, offers insights on how scheduling concerns can have an effect on the profitability of the mall: “Retail schemes are always under pressure in terms of scheduling, because the target opening is usually decided by the sales period. If you miss that, then from the tenant’s point of view, you might as well wait another three months.

“Of course, that doesn’t happen per se, but in a fiscal sense, they [tenants] have missed a season they wanted to hit for maximum impact. So scheduling and programming are always some of the most difficult aspects to maintain. What you get is a shell and core building, but the tenants and leasers coming in later might have their own changes to make.

"These are small changes, but there could be hundreds and thousands of them, and that’s something retail contractors know they will have to be prepared for,” O’Leary asserts.