Research made by ValuStrat Consulting reveals that retail space in premium malls in Dubai has now reached an average rental rate AED 6,000 per sq-m per annum
Declan King – Director & Group Head Real Estate at the ValuStrat points out that growing rates in The Dubai Mall and Mall of the Emirates illustrate high demand from retailers and the importance they now place on being in Dubai. This has led to waiting lists for space in these malls with demand presently outstripping supply.
ValuStrat cites high pedestrian flows as one of the key reasons retail tenants are willing to pay increasing rates for prime mall pitches in Dubai. King comments that the city’s top malls enjoy high pedestrian flow levels ‘… In Dubai our malls are an attraction in their own right -With high volumes of visitors often spending most of the day there…’. He goes onto observe that developers have used our weather conditions to their advantage by creating destination attractions in their malls to help pull in high visitor numbers year round e.g. Dubai Mall’s fountain and ‘Ski Dubai’ at Mall of The Emirates. Other non-core retail amenities that help draw visitors include ice rinks, medical facilities, multiplex cinemas and family orientated amusement centers. ValuStrat’s research shows that Dubai Mall experiences a foot-fall of nearly 180,000 and Mall of the Emirates at 90,000 visitors per day.
The integration of transport links and & hospitality offerings into these malls is another key factor driving high pedestrian flow. This is especially important in a tourist centric location like Dubai. Tourists are a significant contributor towards foot fall in our malls and many overseas visitors specifically come to Dubai for the shopping…’.With Dubai’s hotels recording 5.8m visitors in the first half of 2014 the city is gaining visitor numbers in accordance with its goal of 20m tourists by 2020 – With the top 6 visitor countries in H1 2014 coming from Kingdom of Saudi Arabia, India, UK, USA, Russia and China, Dubai’s best malls are ideally positioned to continue enjoying increasing numbers of dirham spending holiday makers.
Other reasons for impressive pedestrian flows are the high concentration of global retail brands that Dubai’s malls offer and their convenient and central locations within the metropolitan area – They are not built in the more remote ‘out of town’ settings as per much of the rest of the world.
The success of prime malls in Dubai, and the growing rental values they can now secure, is also a reflection of high visitor spend. This ‘conversion’ of amount spent per visitor is a result of the high per capita income that the UAE enjoys, 365 day a year tourist spending, a tax free retail environment and the success of retail festivals & promotions in encouraging shopping activity.
Declan points out that in addition to the high volume high spending pedestrian flows that retailers in malls in Dubai enjoy they also benefit from very long trading hours–Opening until the early morning hours for some periods of the year such as Ramadan and the Dubai Shopping Festival helps increase takings.
However, comparison with mall rental rates in other global cities illustrates that Dubai’s best malls still offer reasonable value to their tenants and the prospect of long term rental growth income for their owners. Research made by ValuStrat is that Dubai is still a little cheaper than Paris – Which has average mall rental rates equivalent to AED 7,000 per sq m and is priced significantly lower than London which is currently trading at approximately AED 18,000 per sq m rental. Some of the most expensive mall space identified globally by the consultancy is in Hong Kong, where rates are in the range of AED 55,000 per sq m per year.
In conclusion, King remarks that Dubai has now firmly established itself as a location that many global retailers simply want to have a presence in ‘…The high regard this city is now held in globally and the success of ‘Brand Dubai’ means that many retailers quite simply need to be in Dubai– Especially those in premium segments who consider the financial returns and the cache of a prime mall outlet in the city as reason to be here….’.With regard to future, ValuStrat note that it will be interesting to see what impact future supply increases such as The Mall of the World and extensions at The Dubai Mall and Mall of the Emirates have on price growth going forward.