Abu Dhabi retail market is facing challenges, indicates JLL

RetailME Bureau

The performance of Abu Dhabi’s real estate market remained subdued in Q1 2019, indicates research firm JLL. The retail market continued to face challenges from a slowdown in retail spending and the rise of e-commerce. This saw many mall operators offer extensive leasing incentives to attract and retain retailers.

No major retail completions took place during the first quarter of 2019, leaving the total retail stock unchanged at 29 million sqft GLA. Supply is expected to increase significantly with approximately 2.2 million sqft of retail GLA scheduled to be delivered by the end of 2019. The key anticipated delivery in 2019 is that of Al Maryah Central on Al Maryah Island. The remainder of upcoming stock is made up of retail shops within mixed-use developments.

An additional 2.4 million sqft of GLA is expected to handover in 2020, increasing the total supply of retail space in the capital to just over 32.2 million sqft. As with all sectors of the market, JLL remains cautious of the delivery of these projects and can expect delays as mall owners take time to strategise and reposition their assets in order to stand out against subdued market conditions.

Despite the limited amount of retail space entering the market in Q1 2019, retail rents continued to decline as vacancy rates increased. Average retail rents across all mall types registered drops of 5% year-on-year (y-o-y). Meanwhile vacancy rates increased y-o-y to register 22%. As a result, and in line with trends elsewhere in the UAE, retail mall owners are becoming more flexible and are offering a wider range of incentives to attract new tenants and retain existing ones.

Despite these efforts however, vacancy rates continue to increase in many malls, particularly the lesser performing, lower quality retail centres. This pressure is also mounting from the growth of e-commerce, which poses a threat to traditional and less diversified malls. Consequently, the government launched Retail Abu Dhabi (RAD), an annual event set to drive demand and increase footfall across malls. As part of this initiative, several malls offered significant discounts and promotions in Q1 2019.