UAE. Real estate consultants DTZ issued today a report on Abu Dhabi’s retail market. The report provides insight into the key issues facing the Emirate’s retail sector and the areas which will provide potential for growth.
A key issue raised in the report is the trade leakage from Abu Dhabi to Dubai which has been an established trend for some years. This is mainly due to Abu Dhabi’s inability to match Dubai’s regional malls with their varied fashion offers and adjoining leisure activities. Through an independent survey, DTZ found that 20% of Abu Dhabi’s population travel to Dubai regularly for shopping trips. Of this 20%, 80% are in the high income bracket.
DTZ estimates that Abu Dhabi’s retail spending is at AED17 billion and to capture this important channel of trade, Abu Dhabi must look to improve the overall standard of retail offer in both its destination mall and luxury goods offer.
Abu Dhabi’s retail landscape is currently being dominated by 5 modern and established mid-market retail schemes, namely Marina Mall, Abu Dhabi Mall, Al Wadha Mall, Khalidiya Mall and Mushrif Mall. The total shopping mall GLA in Abu Dhabi, at the end of 2011, was 709,329 sq m (secondary and prime malls), with close to 60% of the prime mall floor space accounted for by just 3 of those 5 malls; Marina, Abu Dhabi and Al Wadha Mall.
According to DTZ’s report, despite the significant quantity of mid-market retail stock, absorption rates have been high as retailers extend their brands in the main catchment. However, with the considerable supply coming onto the market, new developments will need to carve out a niche market positioning to maintain tenant take up. With this in mind, DTZ’s report highlights a number of segments currently being under served in Abu Dhabi. These include regional and community malls and the luxury goods sector.
Current statistics suggest there is a threat of oversupply in Abu Dhabi’s retail market, as existing commitments are set to double the supply of established modern retail schemes by the end of 2014. However, the supply of new stock will be spread over the 3 year period from 135,548 sq m in 2012 rising steadily to 322,000 sq m in 2014. This potential threat of oversupply is also being addressed by market diversification in to these niche sectors.
Whilst the issues highlighted in the report are starting to be addressed by retail developers and investors, DTZ believe there is further scope for the 3 niche areas:
Abu Dhabi does not currently have a destination mall with a varied retail and major leisure offer. Yas Mall is currently the only destination mall set to become operational early in 2014. If it can successfully establish itself as a destination mall, then it will capture the trade leakage from Dubai. Dalma Mall is also in the process of re-energising its offer and has secured a number of brands for Abu Dhabi. However, it will be some time before it can demonstrate its position as a regional centre that is able to attract shoppers from all over Abu Dhabi and the wider UAE.
Luxury goods sector
To date, luxury brands are located in Marina and Abu Dhabi Malls, although in compromised environments and in limited ranges. The poor offering of luxury retail within Abu Dhabi has become apparent since the opening of the upper marque extension of Mall of the Emirates and Dubai Mall. There will be a correction in this segment which will start with the opening of The Galleria at Sowwah Square, developed by Mubadala in partnership with Gulf Related, and the retail areas in Etihad Towers and Nation Towers. Luxury brands are also favouring relatively small schemes in Abu Dhabi which is in contrast to the way they successfully trade in Dubai.
The Abu Dhabi government is leading the drive for better community facilities on and off the island. DTZ has recognised this requirement and is assisting developers and landowners to extend the community offer which includes essential government services, sports facilities, libraries etc.., to locations where a shortage of such services has been identified.
Andrew Goodwin, DTZ’s Head of Retail Middle East and author of the report, summed up the outlook for Abu Dhabi’s retail market,
“There is a significant pipeline of retail and this will have an impact on the value and orientation of future schemes in Abu Dhabi. Off island malls will diversify away from fashion and have a community focus. The luxury sector is developing differently to Dubai’s model. In the absence of having large destination malls to open flagship stores, luxury brands will open in smaller schemes that become specialised destinations.”