Prime rents in Dubai’s most popular malls have continued to increase, retailers have said, bucking an emirate-wide decline in residential and commercial rates.
Electronics retailer Sharaf DG said it has seen rents in prime locations increase on average 10-15 percent every year but had been able to reduce rents in less popular malls.
“It’s just going up and up every year – I’m talking about the main malls. The other malls we can squeeze them a bit but the main malls no,” said Yasser Sharaf, managing director of Sharaf DG.
“I’ve signed documents and all of them have increased in rental, none of them have reduced rental, none of them capped the rent, all of them the rentals have increased.”
The emirate has spent billions of dollars establishing itself as a shopping destination and is home to one of the world’s largest shopping malls. Last year Dubai ranked 42nd alongside Lisbon in terms of cost of retail space globally, according to Cushman Wakefield.
Real estate analysts Cushman Wakefield said rates at Mall of the Emirates declined 13.8 percent in June compared to the previous year.
“Dubai’s prime retail rents have remained stable quarter on quarter in Q2, demonstrating some stability in the market in 2011. Rental rates for the secondary retail and office sectors have shown a similar trend with the retail sector faring slightly better due to sustained levels of tourism and consumer spending,” said Hannah Jeffery, head of Cushman Wakefield Dubai.
While prices in prime locations are expected to remain stable prices could decline in secondary malls in the second half of the year, added Jeffery.
“Although Dubai remains attractive to both consumers and retailers, there is a demand-supply imbalance, particularly in secondary retail locations and we expect to some reduction in pricing over H2. Landlord’s, particularly in secondary malls, continue to offer further incentives to retain and attract tenants,” she said.
Cosmetic and perfume retailer Paris Gallery, who said many of its rent agreements are based on a basic rent plus a turnover rate, said retailers and mall operators needed to work more closely to increase footfall to offset rising costs.
“Very rarely shopping management is aware and understands what the retailer is going through, especially when it comes to their prices or when it comes to a slow trend. Very rarely they understand, all they want is the rent,” said Mohammed Ar Al Fahim, Group CEO of Paris Gallery.
“[If am] a shopping mall operator I better help you to be successful. Why? Because if you are successful I make more money.”