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DUBAI RETAIL
OVERVIEW July 2018
 01
Dubai Retail Market
02
Global Comparison
03
Dubai Retail Market
Overview Supply

04
Key Trends
05
Future Outlook

This publication
This document was published in July 2018. The data used in the charts and tables is the latest available at
the time of going to press. Sources are included for all the charts. We have used a standard set of notes and
abbreviations throughout the document.

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D U B A I R E TA I L OV E R V I E W J U LY 2 0 1 8

Dubai retail market – an oligopoly

Overview 5 87%
Dubai’s retail sector weathered occupancy across malls came Mall Phase 2 which added
developers own of the mall stock*
challenges over 2017, under marginal downward 52,400 sqm GLA to the retail
absorbing the impact of a pressure. This impact was market, and the Al Seef Phase
slowdown in the global retail also compounded by a steady 2 and 3 developments. Total
market, particularly the luxury increase in supply which GLA in the Emirate is expected

15 90%
sector. drove competition between to continue increasing with
retail developments to attract the completions of other large
Due to the lingering impact retailers, particularly the ones in developments such as Al Khail
of low oil prices over the upcoming locations. Avenue, Nakheel Mall, Dragon
2014-2016 period and City, Deira Mall, Deira Islands
the resulting weakness in Prominent additions to supply Night Souk and The Wharf over retailers operate almost of the international brands
consumer sentiment, average include the completion of Dubai the next few years.

*Malls/shopping centres above 10,000 sqm.

Dubai GDP By Economic Activity

Others
Administrative Services 3%

Electricity & Water, 3%

Professional Services, 4%

Telecommunications, 4%
Wholesale, retail, F&B
30%

Public admin, 6%

Real estate activities, 7%

Construction, 7%
Transport. & storage, 12%

Manufacturing, 9%

Finance, 11%

Retail sector contribution to the economy

Dubai’s retail sector is one of the largest contributors to the emirates economy representing almost
27% of real GDP in 2017 (approximately 103.6 billion AED) according to the Dubai Statistics Centre.

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D U B A I R E TA I L S E C TO R OV E R V I E W J U LY 2 0 1 8

Dubai vs. Global Retail

Total International Tourist Spend vs Prime Rents

30 3,000
Overnight International Visitor Spend

25 2,500

Prime rent per USD/sq.ft

20 2,000
What markets offer attractive expansion opportunities?

15 1,500

The headwinds facing luxury retailing in 2016 and into the early part Toronto, for example, out performs Sydney in terms of population,
10 1,000 of 2017 was exacerbated by high occupational costs in cities such as presence of HNWI, overseas visitor numbers and volume of retail sales.
New York and London. It goes some way to explain why these cities did Yet, prime rents on its key luxury street are less than half of that seen
not feature in the top three for new store openings. Yet, examining on Sydney’s luxury equivalent. Toronto’s relative ‘affordability’ and
the potential trading fundamentals in regards to size of market, luxury spend potential has no doubt helped to drive its appeal to
5 500 international visitors and presence of High Net Worth Individuals luxury brands and hence its feature in the top 10 cities for luxury store
(HNWI), both cities continue t`o look attractive. In fact, examining the openings in 2017.
key global luxury destination cities purely on potential macro trading
0 indicators, the top three cities are New York, Tokyo and London. Other high growth visitor destination markets such as Dubai, Seoul,
0 Miami, Los Angeles, Madrid and Tokyo, all of which have seen
Dubai New York London Paris Tokyo Hong Kong international overnight visitor numbers increase by more than 20%
Beyond these top three, there are a number of global since 2013, are likely to prove attractive particularly in light of their
luxury cities that stand out in terms of potential macro relatively lower store rental costs in some cases. Albeit domestic
trading fundamentals and relative rental affordability. trading conditions, brand saturation at a city level and total operating
Toronto is one such city. costs will be key to ensuring these locations are sustainable trading
Overnight International Visitor Spend in USD Billion Prime rent per USD/sq.ft locations over the longer term.
Global Luxury Cities - Affluence, International Visitors And Rents
All rents reflect annual prime asking rents for the key luxury locations in the given city.
Global luxury cities – affluence, international visitors & rents Prime rent per sq ft per annum in the key
Source : Savills research, MasterCard Destination Index 2017 (The overnight international visitor spend volumes are for luxury street/area (as of Q3 2017)
Prime rent per sq ft per annum in the key luxury street/area (as of Q3 2017)
year 2016, and were the latest available at time of print). 7,000

6,000
NEW YORK
$3,200
5,000 LONDON
Dubai’s Position In Global Retail

Approx. no. of high net worth individuals

$2,918

4,000 HONG
KONG
The potential for further growth Destination Index international Dubai’s potential for further $1,535

in Dubai’s prime retail market overnight visitor spend reached growth as a luxury retail city is 3,000 LOS

continues to be significant $28.5 billion in 2016 more than likely to be recognised by global
ANGELES
$700

despite recent weakness in the double the figures seen in cities brands in the near term as the SAO PAULO
$286 SHANGHAI
TOKYO
2,000
global luxury retail market. As such as Paris, Singapore and number of new entrants into the TORONTO
$361
$1,157
visible in the graph above, lease Hong Kong. market increase. $318 PARIS
$1,636
rates for prime retail property 1,000
SYDNEY SEOUL
in Dubai are significantly lower Dubai also hosts a large number $723 $542

than those in key global retail of high net worth individuals, MILAN
$1,418
DUBAI
0 $381
hubs including London, New visibly higher than cities such MIAMI
$350 MADRID
York, and Hong Kong, despite as Miami and Milan. Although $236

the exceptionally high overnight such comparisons do reflect an -1,000

international visitor spend seen overall disparity in purchasing 0 5 10 15 20 25

by the city. power across these markets, International overnight visitors 2016 (millions)

According to the MasterCard Source: Savills

Source: Savills Research; Wealth-X, Mastercard Destination Index. Note: Rents are for luxury locations bar Seoul which is for high footfall location.
ParisResearch; Wealth-X,
and London rents Mastercard
are ZA and therefore on a per sq ftDestination Index.
basis would be lower Note:
than that detailedRents
above. are for luxury locations bar Seoul which is for high footfall location. Paris and London rents

are ZA and therefore on a per sq ft basis would be lower than that detailed above. 11

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Savills Global Luxury Retail:
The Geography of Luxury Retailing

Global Luxury Retail Cities

Share of global luxury store openings Prime luxury retail rent Q317 (US$ per sq ft per annum) Global luxury city investor attractiveness ranking*

LONDON
5.0% $2,918** 1
PARIS
NEW YORK
5.9% $1,636** 5 SEOUL
3.7% $3,200 2
TORONTO 0.6% $642*** 7
3.1% $318 4 TOKYO
5.9% $1,157 6

MADRID
0.6% $236 9
MILAN
5.0% $1,418 14
LOS ANGELES SHANGHAI
3.7% $700 3 2.2% $361 10
HONG KONG
MIAMI
4.7% $1,535 12
0.6% $350 7 DUBAI
1.6% $381 13

SAO PAULO
0.3% $286 15
SYDNEY
Source: Savills Research
* Investor attractiveness ranking based on market size & occupier terms. 1.6% $723 11
** Rent is ZA per sq ft.
8
*** Rent for high footfall location not luxury

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D U B A I R E TA I L OV E R V I E W J U LY 2 0 1 8

Market Performance

Market Supply Rent Average

Regional & Community Malls
Rent Average
Prime Super Regional Malls*

Gross Leasable Area sq. ft.

150 – 200 700 – 1,500
70,000,000
AED/ sq ft AED/ sq ft
60,000,000

50,000,000
Average Occupancy Average Occupancy
Regional & Community Malls Prime Super Regional Malls
40,000,000

30,000,000
80-83% 90-95%
20,000,000

10,000,000
2015 2016 2017 2018 (e) 2019 (e) 2020 (e)

Existing stock Upcoming stock * Prime super regional malls also see revenue share models which put upward pressure on
average rental rates

Retail Launch in 2017/2018

Retail Launch in 2018/2019*

The Pointe
Deira Mall Retail Launch in 2020*
Bluewaters Retail Strip

Al Nakheel Mall Deira Islands Night Souq

Ain Dubai
Al Seef

Meydan One Dubai Wharf

Al Khail Avenue Mall
The Circle Mall Dubai Creek Harbour Retail

Nad al Sheba Mall

Nakheel Mall

Cityland Mall

Avenues Mall Dragon City

* Due to longer completion timelines,
delivery of these projects may be
delayed or phased.

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D U B A I R E TA I L OV E R V I E W J U LY 2 0 1 8

Key Trends Future Outlook

Experience based retail attracting a higher number of AED1.4 million on energy
retailers and creating a self- costs every year. City Centre Consumer and business significant increase in supply spending in Dubai will see
Cityland Mall is expected to sustaining development. Me’aisem and My City Centre sentiment is expected to with approximately 16 million a greater variety of retail
be completed in Q4 2018 Al Barsha are also examples improve visibly over 2018 sq.ft. of retail space coming options available. The rapidly
and will be a ‘nature-inspired’ Retailers choosing to go of retail developments that due to higher oil prices on to the market. expanding e-commerce
shopping destination. green have solar panels in order to and the launch of several sector in Dubai may also
increase sustainability. large infrastructure projects Additionally, the rapid work towards diverting
Nakheel’s Deira Mall will Shopping malls are by Dubai Government, expansion of retail consumer spending away
feature a 1km retractable increasingly looking at Mid-market vs. luxury including the AED394 million developments in from brick and mortar stores
glass atrium  methods of increasing retailers Shindaga bridge project and neighbouring Emirates may and will require retailers
their energy efficiency and the Dubai Cruise Terminal work towards softening to introduce innovative
Integrating retail and reducing overall energy Although the luxury sector Project. Nevertheless, retail demand in Dubai, as concepts and enhance
residential consumption through the has seen a slight slowdown developments in Dubai consumers from these customer experience.
implementation of green over the past few years, continue to face a number markets that previously
The number of integrated practices and reducing consumers are shifting of challenges including the added notably to consumer
developments that offer a waste. For example, Mall of towards mid-market brands.
mix of retail and residential the Emirates has completed
units are increasing given the first phase of a solar
that they increase an areas photovoltaic (PV) plant that is
marketability and are seen expected to generate 3GWh
to grow ‘communities’ thus of clean energy and save

Integrating
Going green retail and residential -
mid-market

Consumer Increasing
sentiment supply

Experience The rising

affordable luxury Local Brands
based retail market

Drivers Deterrents UAE retail

Tourism sector
expansion

Retail starts to see institutional investment

Declining Online
Although most mainstream retail stock is still held by state-backed developers, we are starting to rents presence
see community retail gain interest from institutional investments. Emirates REIT holds Le Grande
Community Mall in Dubai Marina and ENBD REIT recently acquired Souq Extra Retail Centre in
Dubai Silicon Oasis. We expected this trend to continue with well performing community retail
centres with mid-tier brands and established catchment areas to achieve steady yields.

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