The outlook for consumer demand also appeared highly promising. Tourist numbers are also up across the region, with a particular buzz around the UAE in this respect.
Indeed the major problem at present is securing sufficient trading space to accommodate the new brands being signed up by the franchisees as well as their aggressive expansion of existing brands. As a result, many of the major regional players are flexing their muscles to push into established shopping centres during lease renewal periods, while also targeting up-and-coming retail markets such as Oman and Qatar.
Franchisees that also possess development arms enjoy a significant advantage in this regard, since they can allocate prime units in schemes they develop to brands within their portfolios. Looking ahead, an important issue for the local franchisees will be dealing with the growing impact of the internet. At present, sales for international brands are being cannibalised through non-Middle Eastern e-tailing platforms operated by those brands. Several franchisees we have spoken to say they are looking at ways in which these sales can be ‘repatriated’ through the creation of localised platforms.
With little new shopping centre space coming on stream in Dubai, much of the scope for expansion within the UAE is occurring in Abu Dhabi, notably at the Yas Island development, home of Abu Dhabi’s Grand Prix circuit. The retail element of this mammoth mixed-use scheme is currently leasing and is expected to be fully up and running in 2014/15.
Meanwhile the 1.6 million sqft Dalma Mall, which opened its doors in 2010 and is anchored by a Carrefour hypermarket, has seen a number of brands committed by top regional franchisee MH Alshaya. At the luxury end of the spectrum, a new high-end mall, The Galleria at Sowwah Square, has already announced the securing of many notable brands, including Louis Vuitton, Mulberry and Cartier. The market continues to be a major focus for US retailers with several names, including Abercrombie & Fitch, rumoured to be planning entry. The biggest US retailing group, Walmart, is also among those looking to develop a presence in the UAE market, in this case using the George sub-brand of its UK subsidiary Asda.
With one of the biggest populations in the region, Saudi Arabia is a natural target market for international retailers, which generally make it one of the first ports of call after establishing themselves in the UAE. Brands invariably enter the market through partnerships with local franchisees, with the most active players including MH Alshaya, Landmark Group and Azadea-Saudi Arabia (a joint venture between Azadea of the Lebanon and the Saudi-based Al Faisaliah). In the months to come retailers will find yet more potential for further expansion within Saudi Arabia, with major new shopping centre schemes under construction in Riyadh and Jeddah, the latter’s Flamingo Mall to be anchored by Carrefour and also featuring an indoor skiing facility.
Continuing political uncertainty has seen retailers reluctant to make their move into Egypt, but the country’s large population is too much of a draw for this to be a permanent situation and we believe that once a degree of calm is restored it will be the trigger for numerous international brands to take the plunge. Retailers already active in Egypt are opening stores and expanding into new locations, while the development pipeline is still active, notably Cairo’s 1.9 million sqft Festival City mall. This project of the Dubai-based Al-Futtaim Group should be delivered at the end of 2012 or early 2013 and, at the time of going to press, was said by its developer to
be 75% pre-leased.
High consumer spending levels – even by Middle Eastern standards – have made Kuwait a small but important market for retailers operating within the region. The top two franchise operators in the country, local player MH Alshaya and the Lebanese group Azadea, are both highly active with their existing brand portfolios, although there have been no major new entrants in 2012. In terms of new space availability, the major news in 2012 was the opening of the extension to Avenues Mall, which has made it Kuwait’s biggest shopping centre. Six themed retail areas have been added, each with its own distinct identity and retailer mix. Avenues is a project of the development arm of MH Alshaya, which has further centres planned for the future.
The Moroccan retail market has seen its fortunes fluctuate in 2012. In the early months of the year sentiment was affected by a degree of uncertainty following the election of a new government in November 2011, together with lingering after-effects from the so-called Arab Spring.
In addition, retailers experienced rising import costs as the national currency, the dirham, lost value due to a sharp fall in government-held foreign currency reserves. Nevertheless, from late summer onwards things picked up noticeably, with retailers making up for lost time by commencing negotiations for new store space in many major markets.
The real estate investment market has remained pretty quiet throughout 2012. International investors have shown some interest but with finances still tight it’s fair to say that other global markets are taking precedence over Morocco.
Market entry is still invariably done through a franchise operator. The most ambitious group in 2012 has been the Saudi-owned Alhokair, which has plans to introduce some 20 new brands at the Anfaplace Mall, as well as opening new stores in Tangier, Rabat and Marrakech. Alhokair is also focusing on the luxury segment, having introduced Carolina Herrera into the Casablanca high street environment. It has a number of other brands waiting in the wings, too. Rival franchise group Alshaya targeted the Morocco Mall for its major brand roll-out – given that this scheme opened at the end of 2011 it has naturally been less active in 2012.
In the food and beverage segment, there has been a rise in the number of high-end restaurant concepts arriving, notably Okku, the Japanese brand that is already present in London and Dubai. French restaurants Paradis de Fruit and Maison Blanche have also arrived in Casablanca. Domestic retailing groups largely inhabit the ‘big box’ sector and several are actively expanding at present, including Kitea, which has opened stores in Tangier, Oujda and Rabat. Another domestic group performing strongly is hypermarket chain Marjane, which is the market leader ahead of METRO and Aswak Assalam.
The 753,200 sqft Morocco Mall opened in 2012, representing the biggest and best appointed shopping centre yet seen in Morocco. Some retailers have reportedly been a little disappointed with their trading performance to date, however.
The next major opening is the 323,000 sqft Anfaplace. At the time of going to press this scheme was scheduled to be launched in November 2012. Retailers have been encouraged by the landlord’s decision to eschew access fees in favour of rental-only transactions; as a result, Anfaplace should be 98% leased when it opens. Other notable schemes under construction include the 323,000 sqft Tangier City Centre, which benefits from a good location and a high design specification; also the 484,200 sqft Arribat Centre in Rabat, which offers a rare chance for international retail brands to enter that city so is sure to be in high demand once leasing starts in 2013.
In future Agadir is likely to come to greater prominence – it is still a relatively underdeveloped market for international retailers but once modern retail space comes on stream this is sure to change. There are also a proliferation of smaller developments targeting tourists and luxury shoppers in Marrakech. A good example is Prestigia, which promises 108,000 sqft of exclusive retail and high end restaurants.
Out-of-town retail parks
Still a very young sector in Morocco, there are several development groups investigating retail park projects but few have made public announcements as yet. One exception is a mixed-use scheme in north Casablanca, Casa Green Town, where the developer, MED-Z, aims to create a new residential district with a focus on environmentally- friendly living. This project has a retail park as part of its masterplan.