In 2017 the UAE’s real estate sector continued to adjust to lower growth being the ‘new normal’, states JLL’s 2017 Year in Review report, with all sectors of the market remaining in the downturn stage of their cycle.
One of the major drivers of the more subdued market has been the slowdown in economic growth, which declined from its historic average of 4.1% to just 1.7% in 2017. This represents the low point of the current cycle, with growth forecast to increase again in 2018 (by 3.3%) and averaging 3.4% per annum between 2018 and 2020. This should result in a gradual improvement in the performance of the real estate market, but overall conditions are expected to remain subdued in 2018.
The start of 2018 could see a reduction in activity and performance in the real estate market due to uncertainties around the impact of the Value Added Tax (VAT).
“The UAE real estate industry is entering into a transitional phase, with VAT now in effect and key stakeholders seeking to decipher its immediate and longer term impact. Although VAT does not apply to residential rents and sales of new residential property, other real estate sectors could be negatively impacted by increased costs and cash flow challenges,” observes Craig Plumb, head of research, JLL MENA.
The JLL report notes that the Dubai economy is expected to increase quicker than the UAE average in 2018. This is partially a reflection of the 20% increase in government spending announced in the 2018 budget, with a major portion of the increased spending on infrastructure and projects related to the hosting of Expo 2020.
Here is a brief on the UAE retail markets.
Abu Dhabi retail market summary
There were no major retail completions during 2017, with the supply remaining constant at approximately 28 million sqft of retail GLA. Looking ahead, the supply of retail malls in Abu Dhabi is expected to pick up. There are smaller community and neighbourhood projects in the pipeline, collectively adding 807,295 sqft of retail GLA by the end of 2018. A notable project expected to complete in 2019 is Al Maryah Central – Gulf Related Mall, a super-regional mall on Al Maryah Island, adding approximately 1.6 million sqft of retail GLA.
Dining and entertainment are gaining prominence in Abu Dhabi. The 1.3 million sqft waterfront promenade expansion of Marina Mall is projected to include 209,895 sqft of GLA dedicated to F&B. According the National Investment Corporation (NIC), the promenade aims to heighten the experience of customers through the provision of a mix between shopping, dining and entertainment. Similar projects in the pipeline include Aldar’s Water Edge on Yas Island. The 13 apartment buildings community will be complemented by waterfront dining and retail options.
Rents remained stable at AED3,000 per sqm, primarily off the back of the limited existing stock of good quality malls. However, even within prime malls, the number of units where these levels of rents can be achieved has declined, suggesting there is a difference between face and effective rates. Spending activity might be further challenged in 2018 with the introduction of the VAT. Depending on the price elasticity of goods, sales might see a decline, especially as different market players adjust to the new norm.
Dubai retail market summary
Dubai added 441,320 sqft of GLA during 2017. Notable completions during Q4 included the first phases of Marsa Al Seef and La Mer, both developed by Meraas. Looking ahead, the future supply will feature Dubai South Mall, the Dubai Mall Boulevard Expansion and the Night Souk on Deira Islands, potentially increasing supply by 30% over the next two years to reach 48 million sqft of retail GLA by 2020.
The new supply entering Dubai’s market as well as other regional neighbours faces increased online competition. Fashion is being digitised and thus, the appeal of physical stores will need to compete even more aggressively as their competition has been extended to the limitless options available on the internet. On the other hand, Black Friday sale took place in Dubai between November 23 and 25, with participation from more than 400 brands. Although satisfactory for end customers, such events tend to limit the incomes and reduce the margins of retailers and landlords.
Similar to the global retail landscape, there is generally more supply than demand of retail space. Landlords in Dubai are starting to recognise that, and are offering attractive terms for tenants. This includes price flexibility and how the retail space is utilised. This is particularly crucial as the rise of e- commerce, the over-supply of malls and the increasing appeal for F&B concepts are collectively changing the face of shopping. As such, 2017 saw face retail rents declining an average of -8% and -9% year-on-year for primary and secondary malls. This understates declines in the level of performance due to the increasing range of deals to support artificially high face rents (rent free periods).
Sharjah retail market summary
Sharjah is relatively under provided with modern retail facilities at present. While there is an estimated 13 million sqft of retail space across the emirate, only around 30% of this is in organised retail malls. The majority of retail space is currently in the unorganised sector including souks and street front units, often on the ground floor of mixed-use buildings. There is no super-regional mall in Sharjah at present, with the largest mall being the Sahara Centre (with a NLA of around 807,295 sqft). Other prominent regional centres – including Safeer Mall, Sharjah Mega Mall and City Centre Sharjah – offer international retail brands complimented by entertainment and recreational facilities.
There is relatively little additional retail mall space due to complete in the short term, with most of the additional space planned for 2018 delivery being the expansion of existing malls. The completion of a number of major new malls in 2019 and 2020 – for example Al Zahia City Centre, Avenues Mall, Tilal City Mall – will lead to the emergence of a two-tier market, with less competitive and poorer performing retail centres struggling to retain tenants and sustain footfall.
While the overall market will become more competitive, opportunities remain to develop further modern souks to strengthen Sharjah’s cultural image, outdoor promenades with F&B outlets, small neighbourhood and convenience malls to service growing residential communities and good quality street retail. Although the introduction of future supply will increase the range and quality of available retail options, it will also exert downward pressure on performance, resulting in lower rentals and higher vacancies in 2018.
According to a report by the United Nations, the fashion industry accountsFebruary 18, 2021 | By Shruthi Nair
The jewellery making industry has been under tremendous scrutiny over the yearsFebruary 11, 2021 | By Shruthi Nair
UAE-based Carrefour will become the first retailer in the region to offer new levels
The Organic Farmers’ Market is back in Bay Avenue for its 12th
UAE-based Lulu Group recently inaugurated its first-ever all-female staff store in Jeddah,
Jones the Grocer, the gourmet grocer and cheese retailer launches the Jones
UAE-based Al Maya Supermarkets is hosting a two-week food festival at select
Locally-owned supermarket Spinneys has launched its ‘Power of Plants’ initiative in the
Carrefour UAE has launched “Cookit Yourself” — a curated recipe box created
UAE-based Al Islami Foods, one of the largest frozen food companies in
Marks & Spencer’s plant-based range now offers over 25 vegan products including meat-free
World’s largest fully integrated online brand in fresh fish and meat e-commerce
Homegrown, organic and plant milk company, Koita has announced its expansion into
Majid Al Futtaim’s financial results revealed that in 2020, the Carrefour business
UAE-based Majid Al Futtaim today announced its audited operational and financial results
Words by Tad Tilahun, Visa’s Senior Vice-President, head of Products & Solutions
Words by Fadi Moukaddem, SVP & Chief Financial Officer, Visa CEMEA With
As the COVID-19 pandemic swept the world in early 2020, sector after
Consumers in the GCC are among the world’s most optimistic when considering
Emerging technologies and IT integration in businesses have been taking place for
Data presented by Fraîcheur Paris indicates that beauty products accounted for 22% of the
Tighter restrictions on hotels, restaurants, shopping malls and entertainment venues on account of
While the MENA region’s e-commerce sector was witnessing significant growth of 15-20%
Insights by Mark Thomson, EMEA Director of Retail & Hospitality Solutions at
The latest data analysis produced by YouGov has revealed that 46% of