Dubai Retail market - a continuing shift in dynamics as landlords and retailers adapt to new market conditions

31 May 2017

  

Dubai, UAE:  Consumer confidence in the UAE remained uncertain in 2016 resulting in the Dubai retail market experiencing further softening in Q1 2017.  Well-established malls with higher footfall continue to maintain healthy occupancy rates; however the delivery of additional retail supply is expected to put pressure on overall occupancy rates. UAE shopping malls are also expected to experience further competitive pressures from online rivals, as more consumers embrace e-shopping.

Knight Frank’s long-term view remains optimistic as Dubai’s retail market is strongly supported by the hospitality sector. The delivery of Dubai’s new theme park complexes along with the Opera District and other demand generators is expected to drive demand for the hospitality market, which will undoubtedly have a knock-on effect on the retail market.

Market trends

·         Modest growth in sales: UAE retailers are now seeing modest single-digit growth in sales due to general macroeconomic conditions.

·         Signs of saturation: an additional 900,000 sq m of space will be delivered over the next couple of years through new shopping centres or expansions.

·         Traditional retailers are facing competition from e-commerce leaders such as Amazon. E-commerce sales are expected to account for USD 1.5 billion of the Gulf’s high-end luxury segment within the next four years.

·         Retail strategies: operators are more often offering promotions and price reductions to entice customers and maintain strong footfall to further enhance and build on the emirate’s strong position as a central shopping hub.

·         Electronics market: supported by Dubai’s position as a regional hub for trade flows and re-exporter of devices in the region the electronics market is expected to grow 4.7% to reach USD 3 billion by 2020.

·         Product diversification: traditional retail sector is evolving, offering urban-lifestyle destinations, such as Box Park, Citywalk and the Dubai Design District (D3).

It is our view that brick & mortar stores will continue to be essential given shopping centres in Dubai provide family entertainment in addition to shopping, however retailers may look to realign their real estate strategies to reduce operating costs and to invest further into online channels. 

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For further information, please contact:

Nicola Milton, Head of ME Marketing, +971 4 426 7000, Nicola.milton@me.knightfrank.com

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Notes to Editors

Knight Frank has a strong presence in the Middle East with offices in Abu Dhabi, Dubai, and Saudi Arabia. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants.

Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and together with its New York-based global alliance partner, Newmark Grubb Knight Frank, operate from over 413 offices, in 60 countries, across six continents and has over 14,000 employees. For further information about the Company, please visit www.knightfrank.ae