One of Dubai’s biggest landlords of shopping space has increased rents for retailers already tackling a slowdown in economic activity in the emirate.
Emaar Malls, 84 per cent owned by parent Emaar, raised base rents at its properties, which include “trophy asset” The Dubai Mall, by 25 per cent for renewals in 2015, it said.
The Dubai-listed Emaar Malls also posted a 23 per cent rise in net profit for last year, with an overall 11 per cent rise in rental income, compared with 2014.
The broker Knight Frank says that last November, Dubai had 3 million square metres of retail gross leasable area with Emaar Malls accounting for about 557,420 sq metres of that – or about 18.5 per cent – with 96 per cent average occupancy last year. It plans to add another 1 million sq ft (92,900 sq metres), and 150 new brands, to The Dubai Mall this year.
The dirham’s peg to the strong US dollar has made the UAE an increasingly expensive place to visit, but 14.2 million people still visited Dubai last year, a rise of 7.5 per cent on a year earlier. However, retailers in several segments have begun to feel the pinch as big-spending Russian and CIS tourists stayed away.
Business activity in the emirate began to decline last month for the first time since 2010 as the strong dollar ate into tourism and retail trade, said Emirates NBD.
Retailers in Emaar’s Gold and Diamond Park said they were feeling the effects of the slowdown. “We have had a small fall in sales but we are a busy shop,” said Kiran Pethani, the managing director of Cara Jewellers. “Emaar put our rents up by nearly 20 per cent in 2015 and the Gold and Diamond Park is losing custom and all the other shops are feeling it. The lack of Russian visitors means sales are hard to come by. We manufacture our jewellery here allowing us a margin play, but others do not. How can we sell a Dh100,000 gold bar if we have to add 20 per cent? People will go to Bur Dubai to buy it.”
Emaar could not be reached for comment.
Data from JLL in October showed that in Dubai, primary retail rents were 4 per cent higher year-on-year with secondary rents up 6 per cent.
“We see rents near the top of our rental clock,” said Andrew Williamson, the head of retail for JLL Mena. “Sales are a function of rents and Emaar’s turnover rents also jumped significantly in 2015, meaning sales are still strong. Dubai Mall is as much about marketing as sales for many brands as it is a flagship destination for Dubai.”
According to Euromonitor, while growth in the luxury retail segment in the Emirates remains strong, particularly for leather products, designer clothes and timepieces, “tourists, just like residents of the United Arab Emirates, are becoming more discerning when it comes to shopping for luxury goods”. Iconic brands are most in demand, it said in January.
The Dubai Mall taps into that trend, Mohamed Alabbar, the chairman of Emaar Malls and parent Emaar Properties, said in the mall operator’s statement. “Our trophy asset, is today the first choice for luxury retail for high net worth individuals. The robust performance of all our mall assets underline our commitment to sustained value creation for our stakeholders,” he said.