Never through the year is the significance of malls in the GCC as clearly highlighted as it is during the week of Eid. Mall visits have deeply embedded themselves with the region’s culture, paving the way for economic benefits across the GCC countries.
Leading this movement of freeing the economy from oil dependence is the UAE, which in 2014, was ranked as the fourth most lucrative retail market globally, up three notches from its 2010 rank, by the Global Retail Development Index (GRDI).
Alpen Capital’s GCC Retail Industry report, released in January 2015, claims international retailers find the retail market in the UAE “safe for expansion”. “The completed modern retail sales area in the UAE was approximately 2.1m sqm in 2013, the highest across the GCC region.”
“Availability of quality retail space however remains scarce in comparison to its demand, leading to an uptrend in the rental costs across the country. The upcoming retail construction projects are expected to counter this dearth of retail space,” the report continues.
Perhaps the most sizeable of the numerous upcoming mall projects in the UAE is Dubai Holding’s 446ha (48m sqf) Mall of the World, a $6.8bn development set to contain a theme park, the world's biggest mall, 100 hotels, and a theatre district. Phase one of the project alone is expected to require three years for completion, and Dubai Holding is aiming to deliver the entire development by 2024.
Capital city Abu Dhabi, where the 23ha (2.5m sqf) Yas Mall opened last year, is now readying itself for Reem Mall, the $1bn development for which concept plans were approved by Abu Dhabi Urban Planning Council in July 2015.
Construction contracts for Reem Mall have also been handed out; architect firms RTKL and Dewan are on board with the project which also involves retail specialists MSquared.
Particularly elated with Reem Mall’s approved concept plans is Donal O’Leary, director at Faithful+Gould, the firm which has been contracted to carry out cost and commercial management works for the project.
“Reem Mall will sit well within the capital’s financial district, Abu Dhabi Global Market Square, at Al Maryah Island,” O’Leary tells Construction Week.
“Gulf Related [developer] launched the Galleria there three years ago, which has been very successful since its launch. Farglory [Taiwanese developer] is also working on a residential project at Al Maryah. Reem Mall is going to be a strategic fit into the master development.”
Well through enabling works, O’Leary expects construction work for Reem Mall to begin in July 2015, with the first quarter of 2018 set as the window for the mall’s opening.
It’s hard to pin down how many malls have preceded Reem Mall – and how many will succeed it – in the UAE. Since their early beginnings as shopping centres, such as Burjuman and Al Ghurair, malls have gone on to transform the architectural and economic landscapes of the UAE. The country’s wholesale and retail sector now contributes 8% of the UAE’s GDP, up from its contribution of 6.8% last year. Sheikh Mohammed bin Rashid Al Maktoum, Rules of Dubai and Prime Minister of the UAE, has attributed growth trends such as the retail sector’s as reducing the impact fluctuating oil prices would have otherwise had on the country’s economy.
O’Leary credits the country’s government for encouraging the retail sector to grow, leading to the development of the market as the global tourist hub it is known as today.
“Malls in the UAE are a massive drawing point, and the momentum doesn’t seem to be slowing down in terms of the capacity of projects either. UAE is probably, in retail terms, at a saturation point. It already boasts the second highest penetration of international brands in the world.
“But the country still adds a unique spin to its projects, like it did, for instance, with Majid Al Futtaim’s ski dome 10 years ago at Mall of the Emirates. That is where the regional growth of malls is headed,” Faithful+Gould’s director continues.
He states the instance of in-mall hotels as a trend the region is developing particularly well: “Hotels are now being developed as a part of the mall’s complex. Irrespective of whether they are constructed before, during or after the actual mall; or the financial modelling the properties follow, the trend of hotels being built alongside hotels is definitely growing, more so because the region is working towards a goal of destination dining.”
Notable regional malls currently at various stages of construction include Urbacon Trading & Contracting’s Mall of Qatar in Al Rayyan and Al Diriyah Festival City in Riyadh, being developed by a joint venture between Al Futtaim Group and Kayannat Real Estate Company. The latter, it is believed, will replicate Al Futtaim Group’s Festival City concept, which has previously reported success in Dubai.
Mall of Qatar, due for opening in the fourth quarter of 2015, is also set to draw sizeable revenues for the country through the 20 million annual visitors it is expected to host. The mall will be anchored by retail giant Carrefour, tailing 13,700sqm of space at the development.
“Malls anchored by hypermarkets and supermarkets are less vulnerable to economic swings than luxury fashion, jewellery and other discretionary items,” Stephanie-Alexandra Charter, marking 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’ve [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.