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LULU, one of the biggest hypermarket and supermarket chains in the GCC, has opened its first store in Bahrain at a time when the Middle East region is undergoing a retail revolution.
At the current value, the region’s retail sector is estimated at $100 billion.
The ME retail market is principally concentrated in the GCC and it is expected grow triple-fold by 2016.
The number of completed retail units in the GCC to date is 13,806, spreading across 3.77 million sq m gross leasable area (GLA).
Some 2.2 million sq m GLA is currently under development involving a further 3,520 retail units. With the announced projects, the total number of shop units will cross 27,000 over 9.42 million sq m of GLA.
Among the GLA under development, more than three million sq m are taking place in Dubai. This represents about one third of the total retail development in the GCC.
Dubai’s GLA accounts for 17 per cent of the total GCC’s GLA. However, with the massive retail development, Dubai is expected to increase its share by double, to 34 per cent by 2010.
What are the factors that boosted the GCC retail sector?
Economic growth, first of all, then the development of the tourism and allied sectors and finally the huge availability of real estate for the retail sector.
Studies have found mall usage in the Middle East is 30 per cent higher than that in the US and Europe.
Colliers International, a top property service consultants globally, says, Dubai is poised to see the biggest actual increment in GLA by the decade end, from around 1.35 million sq m in 2006 to over four million sq m. As against some other states in GCC, Dubai’s retail realty will not stagnate in the foreseeable future.
With increased tourism traffic and massive retail and commercial development taking shape, Dubai’s retail spending could cross Dh27.89 billion ($7.6 billion) by the end of 2009, according to Retail International.
By 2009, retail activities in shopping centres would contribute about 50 per cent to Dubai’s GDP.
By 2009, Abu Dhabi’s retail spending will reach Dh7.19 billion, the same in Sharjah to cross Dh2.36 billion.
In total, retail spending in the UAE will reach almost Dh37.44 billion per year by 2009, if the current projections are to be taken seriously.
At the same time, per capita gross GLA is expected to shoot up to 27.26 square feet in Dubai, 5.35 sq ft in Abu Dhabi and 4.04 square feet in Sharjah from their respective current levels. In total, the UAE’s per capita GLA is expected to reach 4.38 sq ft, third among the GCC.
Qatar and Bahrain are expected to have 6.84 square feet and 5.57 sq ft per capita GLA respectively by 2009. By 2009, retail spending in Qatar and Bahrain will be around Dh4.95 billion and Dh4.81 billion respectively.
Retail spending in Jeddah, Riyadh and Khobar, is expected to reach Dh10.82 billion, Dh7.81 billion and Dh2.95 billion respectively. The three major cities of Saudi Arabia account for Dh21.58 billion retail activities.
Some 3.55 million sq m of space has been completed in shopping malls across the six GCC countries. With a further 1.24 million sq m currently under construction and 3.5 million sq m in the planning stage the total is set to top 9.4 million sq m within five years.
Among the imports, food offers a glut of opportunities as a major fraction of the food items are imported throughout the Middle East.
Hypermarkets, superstores, and supermarkets account for half of food retail sales in the GCC, home to big retailers like Carrefour, EMKE Group, Azizia Panda, Blue Square Israel Ltd, Super-Sol Ltd, Sultan Centre and Spinneys Group.
However, the big question is: Will the region be able to sustain this level of growth in the retail sector, year after year and for how long?
At current demographic levels the available retail facilities would require every man, woman and child in Dubai to spend around $7,800 annually to sustain an overall average sales figure of $3,500 a sq m a year in more than 25 or so shopping malls in Dubai. This compares with an annual spend requirement of under $600 in Kuwait, a Retail International analysis says.
Given the recent economic growth levels in Dubai, this may not be so hard to achieve by 2008.
Nevertheless, the future and long-term success of retail sites lies not in their size or architecture but in the acquisition of strong, well recognised and desirable brands to fill the spaces within them.
The recent bidding war between Japan’s Fast Retailing and Dubai’s Istithmar for the US-based upscale department store chain Barneys in New York as well as the Qatari-backed Investment fund Delta Two’s ongoing bid for the UK-based grocery chain Sainsbury’s are efforts to bring to the region top brands.
At the global stage, retail is experiencing an explosive modernisation as investment rushes into developing markets. From small proprietors with a mainly local focus, retail’s ambitions now stretch worldwide, embracing the latest trends in marketing, distribution and supply.
Retailers that can identify the most promising markets will become fierce global competitors – able to saturate the obvious markets and gain first-mover advantage in new ones. Retailers understand these new realities.
Modern retail has been expanding to new markets for a few years now. The trouble is it is difficult to determine which new market is the most promising one.
Talking Business
K S Sreekumar
sreekumar@tradearabia.net
