Just Got Better

Just Got Better

Globally, Dubai is known for two things: its architecture and its retail sector. In May 2013, the annual survey of CBRE, the world leader in real estate services, announced that Dubai had retained its position as the second largest retail market in the world, only slightly behind London, but now far ahead of Paris, Moscow, and New York. The ranking is establishing by monitoring cross-border retailer movement. The survey is now in its sixth year, and maps the footprint of 320 of the world’s top retailers in over 200 cities. CBRE was also able to establish a “hot market” by observing the number of new brands entering a market, and where Dubai came fourth, a drop of two places on 2012. Over that year, the Emirate attracted 25 new retail brands, including Franklin & Marshall, Galvanni, and the Cheesecake Factory. Hong Kong took the lead by welcoming 51 new brands. The Middle East is the fastest growing location for new representation, especially for food and beverages, and inevitably the first point of entry is usually Dubai. When it comes to attracting luxury brands, Dubai is once again in fourth place worldwide. Recently, the Emirate has drawn in the likes of Canali, Tom Ford, and Cartier. The retail sector is also significant in helping to drive economic growth. According to the Dubai Economic Council, it contributed 28% to Dubai’s growth plans, closely followed by the industrial sector at 16%. In 2012, retail accounted for 12%, at AED15 billion, and is expected to grow at a rate of 5.5% until at least 2015.

Currently, Dubai has a little over 2.8 million sqm of retail space available. By the end of 2013, a number of projects are expected to be completed, the most significant ones being Phase I of the Avenue, the Beach Mall, The Dubai Pearl Shopping Mall, the Nakheel project on Palm Jumeriah, and the expansions of the Ghurair Center and the Dragon Mart. Over the next two years, Dubai’s total retail space is forecast to increase by 390,000 sqm to 3.2 million sqm. Rental prices have also shown significant signs of recovery since the global financial crisis, especially for primary retail space. In 2010, the cost per sqm for primary retail space had dropped to around AED3,000; however, rental costs have now recovered to around pre-crisis levels, at AED5,000 per sqm in 1Q2013. Demand for primary space remains high and is driving the price; however, rental prices for secondary space have not experienced the same rebound, and have been steadily dropping from the pre-crisis level of around AED3,000 per sqm to the current level of AED1,595 per sqm in 1Q2013. This is largely due to a lack of demand for secondary and older malls, with the arrival of more modern and better amenities. Despite this lower demand, vacancy rates across the city have dropped 13% overall, largely due to the fact that primary retail space has outperformed and negated the higher vacancy levels in secondary space.

It is not just on the high street where shops are experiencing growth. Dubai is well known for its duty free products, and people travel from all over the world to buy them and experience the city as well. In the 1980s, Dubai Duty Free generated an average of $5.50 from each passenger passing through Dubai Airport. In 2012, that rose to $47 per passenger. In the same year, Dubai Duty Free sold 73 million items of merchandise, which amounted to 23.5 million transactions at the cash registers. “In 2013, we are completing 70,000 transactions each day. At the end of this year, I am confident of being able to announce the completion of 25 million transactions on sales of 80 million items of merchandise,” Colm McLoughlin, Executive Vice-Chairman of Dubai Duty Free, explained to TBY, when describing the company’s growth plans for the coming year. “We also perform much better than similar companies in other countries.” On average, the company is able to sell to 49% of passengers passing through the airport compared to 17%-18% at Heathrow or Charles De Gaulle. McLoughlin expects that in 2013 the company will reach a turnover of AED6.5 billion, which equates to around $1.8 billion.