If there is one thing economic volatility loves, it is a boost in spending by confident consumers.
Dubai Mall primed for big impact
DUBAI // If there is one thing economic volatility loves, it is a boost in spending by confident consumers. With this in mind, the property developer Emaar will launch its latest measure to buck the global financial crisis this afternoon, when the doors open to Emaar's colossal Dubai Mall. After more than three years in the making, residents and tourists will finally get a glimpse of what was once touted as the world's largest mall, but has since been dwarfed by the South China Mall in Dongguan, southern China.
Largest or not, the mall spans an area equivalent to 50 football fields and has earned bragging rights with more than 1,200 stores, the world's largest indoor gold souk, an Olympic-size ice-skating rink, a 22-screen cinema, plus the world's largest aquarium. Among retailers making their regional debuts are the French Galeries Lafayette, the US department store Bloomingdale's, London's famous toy store Hamley's, and the UK's luxury supermarket Waitrose.
Yousif al Ali, the general manager of Dubai Mall, said the centre would offer something for everyone. "The retail space at the mall has been categorised by precinct," he said. "The idea behind this is to provide shoppers with specific needs in one area." At least 600 stores will be ready for the centre's partial opening at 2pm today, with hundreds more expected to open in the weeks to come. Executives for the mall would not say when they expected the centre to be ready for its grand opening, but sources said it would be no earlier than the beginning of next year.
Mr Ali said he expected 30 million visitors in the first year of trade and, with a boost in both population and tourism, that number was likely to grow. "The main factors that determine retail expansion are current trends of demand and consumption, which indicate that malls and retail ventures will continue to enjoy sustained investor support," he said. Currently worth about US$100 billion (Dh367bn), the GCC retail sector is set to grow to $490bn by 2010, making it a major driver of the region's economies, according to the shopping centre and retail consultants Retail International.
Retail spending in the UAE alone is projected to reach $10.18bn a year by 2010. Still, critics have warned that the city's retail industry risks oversaturation if developers continue building malls at the current rate. Dubai is expected to have 4.25 million square metres of retail space by 2010, up from 1.17 million sq metres in 2006, an increase of 263 per cent. With huge centres in the works, such as Ilyas & Mustafa (I&M) Galadari Group's Mall of Arabia, which will surpass the Dubai Mall in size, that figure is set to skyrocket. "The overall market in Dubai is heading towards overcapacity," said Robert Ziegler, vice president of the management consultancy firm AK Kearney, adding that retail spending per capita would have to increase 280 per cent between now and 2010 to support the expansion of retail space.
"Declining occupancy rates are expected to face the market, but for high-end retail properties, such as Dubai Mall, good performance is expected to continue," he said. While many are concerned that Dubai is quickly approaching the point of oversaturation with its retail offering, developers say the city is not even close. "I wouldn't be building developments if I didn't think the demand was there," said Graham Dreverman, the group managing director for Nakheel Retail, which has launched an ambitious plan to build 100 malls in Dubai over the next 20 years, including one on Palm Deira which will be bigger than both the Dubai Mall and Mall of Arabia.
"If you look at it for the requirements Dubai has right now then you might think it is getting overpopulated in terms of shopping space, but you have to look at Dubai down the line in terms of population and tourism," said Ajay Dayal, the general manager of retail and marketing for Easa Saleh Al Gurg, the holding company with brand names including United Colors of Benetton and Siemens appliances. "You need more and more space for retail."
Seemingly a world away from the financial downturn pummelling much of the developed world, the UAE is among a handful of countries bucking the global crisis with its love of high fashion, fast cars and shiny jewellery. Everything from car sales to computer sales and mall revenues is enjoying double-digit growth and is expected to continue this way for months and possibly years. A visit to any of the city's malls on a Friday night is a testament to the confidence exuded by the domestic retail sector, with shoppers jostling for space and parking nearly impossible.
Industry insiders say that with mall revenue growth rates at an average of 30 per cent year-on-year, talk of a slowdown is speculative - and nothing more. "There will always be room for additional players," said Shahram Shamsaee, the senior vice president of retail for MAF Shopping Malls, which has embarked on expansion projects at several of its existing centres, including Mall of the Emirates.
"When a new mall opens, purely based on the novelty factor people go and have a look, but after their first or second experience they decide what their favourite place is - and we always find our customers coming back." @Email:email@example.com