What would the mall of the future look like? Is it going to be this futuristic space manned by robots and drones? Is it going to be bigger in scale or smaller? Would retail stores be the sole driving force or would it be a combination of many other elements? Shopping malls have been through multiple layers of evolution over the last few decades, becoming the ultimate destination catering to the ever-changing needs of the consumers. The Middle East has especially come a long way from its harbour-side souks to cornershops to housing some of the world’s biggest and most popular malls today. Mall-retailer relationships have also undergone tremendous changes in the past years. Traditionally, malls relied on department stores and anchor tenants to draw footfall, but that model is slowly being challenged.
“We used to get four departments store, 200 shops, three restaurants and call them a mall. But today, department stores aren’t as relevant. What’s more relevant is an H&M or Nike, or an Apple store, which are the drivers,” said Phil McArthur, Founder and Chairman of McARTHUR Retail Development Specialists.
The growth of e-commerce sales and reduction in in-store traffic are creating new challenges for malls, forcing them to adapt to a more modern approach of retail real estate. With experience being the name of the game for both retailers and developers alike, the purpose of real estate for consumers would need to be rethought.
“As we start linking e-commerce in retail, maybe we don’t need as much physical space (for shopping). We may need more hotels, residential towers, medical centres etc.” he added.
Echoing the same sentiments, Jerome Georges-Vivien, Country Manager at AZADEA said, “While some malls understand the importance of experience, many others are ignoring it. Today, just because you have singular traction or have more restaurants than a competitor, you don’t become more attractive. Malls need to be built as cities with hotels, where you can sleep, eat and drink, have concerts, art centres etc. So it isn’t anymore about one single attraction,” he said.
Kuwait’s Tamdeen Malls, however, have been at the fore in recognizing and keeping up with the trends of providing experiential offerings, focused not just on shopping but also on an array of lifestyle extensions. “Take an example of 360 Kuwait, which is a luxury mall with chandeliers and luxury carpets and coy fish ponds. When we did the expansion of this mall, we had the option of bringing more retail options, which was missing. But we chose to reposition the mall in a different way. For example, we brought in a hotel, but we also brought in the Rafael Nadal Tennis Academy into the mall. We also built a multi-purpose arena for tournaments and concerts and we gave it to Live Nation to manage. We also have a high-end French gym as Athleisure is becoming prominent for customers today. So from a mall, we are becoming a lifestyle destination,” explained Avijit Yadav, CEO of Tamdeen Mall Management.
Among the many things that consumers expect from malls today include food – F&B, grocery, farmer’s markets, food halls – health and wellness, and new entertainment concepts. Consumers are also expecting less retail and more content in the form of events, art, hospitality, infotainment etc.
While shopping malls in essence are physical in nature, another factor, which is becoming important in the success of a mall is the integration of technologies and digitisation to ensure convenience and seamless shopping journeys. “Developers need to improve and embrace technology within malls. Malls need to implement solutions for parking, wayfinding, and others to make customers journeys easier,” said Amina Flaifel, Head of Real Estate at Alhokair Fashion Retail.
Malls and retailers heavily depended on each other for their success, but in the last few years, owing to financial crises, oversupply, and rental disputes, the dynamics have wavered, instigating a call for change in mall-retailer equations. “Post-pandemic we started discussing many models for rentals and sales. We started discussing
sales ratios with more developers as sales will get value for landlords too and not just for retailers,” said Amina.
Apart from renegotiating rental agreements, data sharing has also become an important factor in the changing dynamics between operators and retailers.
“As retailers, we are providing our data but we don’t receive any audited information from the malls. In the future, we should have a good exchange like FMCG panels and hotels, so you can understand the situation. We need information about the customer flow, which floor performs better and which doesn’t and the malls need to share it with us,” explained Jerome. “In the UAE, there is an oversupply. We see some malls dying because of this. In AZADEA we like to give a chance to our stores and we always try to save them by renegotiating with the landlord or challenging the operational costs, but if we are losing we close the stress,” he said.
“On the other hand we have pressure from suppliers who tell us ‘fewer, bigger, better’. So malls are unfortunately losing a lot of stores because of that. Zara is a good example of that. Earlier we had 1500 – 2000sqmt stores, today they are 4000 sqmt,” he added. Fahad Kazim, Head of Real Estate at KPMG feels that situations are now changing, with mall operators opting to be more transparent and flexible with their data and solutions.
“The UAE started addressing the issue of oversupply a few years back. What has majorly changed is the flexibility in commercial modeling. Although it is not as fast as it should be, but it has started. The ability for the mall operator to share data is increasing although the level of transparency should be higher,” he said.
“Today, when malls do lose a collection of tenants, we have enough agility and dynamism in the business to shift it across to different users. Some great examples were given of event spaces or increased store spaces. There have also been a number of pop-up concepts and how these pop-ups started coming
up is interesting to us,” he added. In the next few years, malls are going to evolve tremendously catering to the new generation of tech-savvy, experience-oriented, purpose-driven customers.