mena retail overview q3 2010 v10

P. � I COLLIERS INTERNATIONAL

MENA RETAIL OVERVIEWQ3 - 2010

BALANCED

DEVE

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www.colliers-me.com

Independent Consultants Local Knowledge and Expertise Global Network

Colliers International has been providing a

comprehensive range of real estate consultancy

services on a global scale for the past 35 years.

Today the company has over 480 offices in more

than 61 countries spread over six continents

covering every major real estate market.

Colliers International has been supporting

client decision-making in MENA real estate

markets since 1996, and has provided strategic

advisory, market research, property asset

management, agency, property valuation, retail

development solutions and capital investment

services throughout the region.

ContentsRetail Survey 3

Dubai Retail 5

Abu Dhabi Retail 6

Doha Retail 7

Riyadh Retail 8

Jeddah Retail 9

Eastern Province Retail 10

Damascus Retail 11

Cairo Retail 12

Tripoli Retail 13

Available Market Studies 14

Contacts 15

RESEARCH REPORT I RETAIL I THIRD QUARTER I �0�0


RESEARCH REPORT I THIRD QUARTER I �0�0

It may be fair to say the Shopping Centre Industry has been through a challenging period but we feel the UAE , in particular Dubai, has weathered the storm quite well in comparison to other markets.

We are now seeing signs of growth again, compared to previous years, for specific sector or categories. With the continuance of the shopping festivals and initiatives by the local authorities retailers are feeling optimistic about the future. However this cannot be said for the region in totality.

The Dubai and Abu Dhabi markets remain up-beat and strong brand presence will continue to grow and be the preferred entry into the new region for new products and brands. As such growth remains positive for retailers especially in the UAE and Saudi markets. Just as important are Egypt and Syria where the push for expansion and market share or spread is very evident. The latter two are the main targets retailers are now pursuing outside of the previous top tier locations of Abu Dhabi and Dubai and two markets worth watching.

With the consumer attitude now shifting towards middle ground spending patterns, we feel retail houses and shopping centres are looking at purging product mixes to be more aligned to the new specific demand consumer profile. Retail companies owning multiple franchises will look to possibly relinquish brands that no longer match to market. However this cleansing will see the replacement and growth of new products to their stable thereby providing a more robustly spread portfolio. Couple this to the newly found operational efficiencies of retail practices; the resilience of retailers should see a more positive outlook in 2011.

This will also be seen in the developments these retail brands seek to occupy. The move away from the need to establish market share towards a much greater degree of selectiveness is more apparent than before as retailers profile the developments to match

their product or brand. A greater emphasis on developing shopping environments alongside the input of retailers should be more common place in turn establishing a specific positioning statement for new developments.

A greater consideration to the needs of specific retail products will need to be harnessed by developers. We have seen some assistance by established developments but these are felt as short term relief rather than a longer more sustainable model for both retailer & developer.

As developers turn their attention to tweaking their mixes to attract new products and retailers replacing brands for new more current market focused offerings, there is clearly a need for more parity between the two. The current practice of providing perceived relief positions will not encourage longer term solutions to the benefit of all parties.

Retailers will continue to focus on their market share and will be highly selective when opening new stores; pursuing the “match to market” policy of what they consider as an almost exact fit for their product. The more successful developments will continue their lofty status and it may be fair to say there will continue to be a large gap between prime locations and secondary locations.

This is not to say all small to medium locations are destined to be left behind, it is a matter of these landlords repositioning themselves to match the market. These existing and newer developments will certainly need to look at a clearly defined researched lead approach and involve the retailers from the outset or form the development strategies from the needs of where retailers are now directing their growth positions. Greater emphasis on targeted developments will be seen, such as replicated community or neighborhood outlets. The challenge ahead now is how new, or even strong existing, developments align themselves to the commitments retailers have to their consumers.

Stuart GissingRegional Director

Sustainability found in Parity?


Despite the Slump in the Economy, Retailers are continuing their Expansion PlansIn the light of current limitations on the availability of consumer credit,

widespread wage reductions and reduced disposable income levels,

Colliers International conducted a survey in an effort to measure the

general business sentiment amongst retailers in the MENA region.

The survey was conducted amongst leading retailers and retailing

groups with a prominent presence in the MENA region. Retailers

were sourced from a wide spread of trading categories including

high-end designer fashion outlets, mid-range fashion, value fashion

stores, specialty foods, home furnishing, electronics, pharmacies and

jewelers.

Retail Expansion PlansRetailers in emerging markets are better positioned for growth than

their counterparts in mature economies. This is specifically true

considering Dubai’s retail sector having weathered the downturn

considerably well, in comparison to other global markets. Specific

sectors and markets have performed better than last year and are

more optimistic about the future.

All respondents in the Colliers retailer survey have indicated that they

have plans for the expansion of their operations in the Gulf region and

are proceeding with the execution of those plans. Abu Dhabi was

identified as the most preferred destination for expansion, with 93%

of the retailers planning new outlets in the UAE capital. Dubai was

the next most preferred city for retail expansion.

Other Gulf cities and countries that are being targeted by retailers

in their expansion plans are Doha, Saudi Arabia, Cairo, Tripoli and

Damascus. The graph below shows the destinations being targeted

by the survey respondents and the percentage of retailers looking at

these destinations.

With regards to their expansion plans in Abu Dhabi, most retailers

(around 22%) are looking at shop space of between 100 m² and 500

m². Fewer retailers are looking at units of 1,000 m² or more but this

is not seen as significant since units in the 100 m² - 500 m² range

are generally in greater demand than smaller or lager units. In Dubai,

however, there has been no similar clear indication from retailers

as to their preference for specific unit sizes. It is believed that the

reason for this is that Dubai retailers are more flexible in terms of the

space they are able to consider for occupation and have operational

models for a greater range of unit sizes. Location of the development

and the actual unit is more of a concern.

The UAE, more specifically Dubai, operates on a global retail platform,

which has been successful in attracting established international

brands. While Dubai is more favourably positioned as an entry point

for new brands into the region, Saudi Arabia, Egypt, Doha, and Syria

are now likely to grow in popularity as retailers expand their existing

presence in the region. The issue on these new markets is the quality

of development for retailers to open in.

RETAIL SURVEYTHIRD QUARTER I �0�0

www.colliers-me.com

100%

80%

60%

40%

20%

0%Abu Dhabi

RETAIL EXPANSION PLANS

Dubai Doha Saudi Cairo Tripoli Damascus


Whilst surveys by international agencies indicate that consumer

confidence in the UAE dropped during the first half of 2010, Colliers’

retail survey indicates a positive outlook amongst retailers in regard

to the business environment over the next 12 to 24 months, as is

evidenced by their expansion and roll-out plans for 2010 and 2011.

Retailers’ business expansion plans are not however only focused

on increasing the number of retail outlets, but also on reviewing

business strategies. The Colliers survey results indicate that retailers

have, in the economic downturn, developed an increased awareness

of consumer attitudes and purchasing patterns. They are shutting

down brands that fail to perform in a given market and replacing

them with new products/brands that are closer aligned to consumer

demand in terms of both need and price point.

Retailer product portfolios must be aligned towards consumer demandsThis process of retailers “purging” their product portfolio has been

accompanied by an increased selectiveness in terms of malls in which

they want to have a presence as well as their outlet location within the

mall. Until recently retailers were inclined to open outlets in whichever

mall they were able to secure space, with little consideration as the

market positioning of the mall, or their store location or adjacencies

within the mall. The downturn in the economy has seen retailers

advance to a greater level of discernment in terms of the malls that

they select to position themselves in and they are questioning issues

such as footfall, shopper profile, mall position, mall promotion, mall

management etc. Having decided that they want to be in a specific

mall, they are now paying more attention to the location of their unit

within the mall, sight lines and adjacencies etc.

The Mall of the Emirates, Dubai Mall and Deira City Centre were

the most popular developments among retailers for future brand

expansion. Abu Dhabi’s forthcoming shopping mall pipeline has also

generated interest among retailers seeking to expand their current

retail franchise stores.

Retail Sector OutlookOptimism of retailers in the region was further highlighted when

survey results showed 93% of the retailers are expecting a market

recovery in the next 6 to 24 months.

Although the economic recovery post downturn continues to remain

weak, there is no doubt that a sustained and significant improvement

in job creation and income growth will translate into increased retail

sales volumes. A turnaround in the job market is likely to compensate

for other limitations such as restricted consumer credit in the

region.


40%

35%

30%

25%

20%

15%

10%

5%

0%Abu Dhabi

EXPECTED MARKET RECOVERY

Dubai

6 months - 1 year 1 year - 2 years 2 years +

Dubai: Plans for Expansion

2013 5%2012

11%

2011 42%

2010 42%

2012 9%

2011 36%

2010 55%

Abu Dhabi: Plans for Expansion

25%

20%

15%

10%

5%

0%<100m2

EXPANSION BY OUTLET SIZE

101m2>500m2 501m2>1,000m2 1,001m2>2,000m2 >2,001m2


Retail Rental TrendsAccording to the survey, 30% of retailers in Dubai have had their

rents reviewed downwards in the past twelve months, while only 7%

have experienced increases in rental rates. On average, declines in

retail rental rates in Dubai ranged between 20% and 60%.

Retail rents in Abu Dhabi have, to a certain degree, been more stable

than in Dubai, with only 17% of retailers having had their rents reviewed

downwards. On average, rents were reduced by 10% - 20%.

In the light of falling sales revenues and lower consumer confidence,

a number of previously tenants have relocated to less expensive

locations in order to benefit from lower rental rates while others

are negotiating better lease terms in their contracts. This was

dependent on the type of category of product offered by aretailer.

With the swing now towards a tenant oriented market, shorter

lease terms, break clauses and rent-free periods are becoming

increasingly common. However Colliers is expecting a shorter

period than expected. It should move to a position of greater parity

between quality landloards and quality retailers.

Given the current market conditions, 57% of retailers are expecting

rents in Dubai to reduce further, whilst 17% are expecting no change in

rentals, and only 3% believe retail rents in Dubai are likely to increase.

In Abu Dhabi, on the other hand, the majority of retailers (70%) are

expecting either an increase in rentals rates or at best, unchanged

rental levels for the foreseeable future. Of those questioned it was the

fashion industry, 60%, that felt there will be no significant changes in

retail rents in the capital.

While a number of retailers have experienced reductions in turnover

levels, some retail chains have grown despite the economic downturn.

Going forward, with competition intensifying, retailers who are able to

satisfy the needs of consumers in terms of location and cost efficiencies

are likely to gain market share and see their businesses grow.

It is felt that any increases in retailers are reflected towards new

lettings or on specific renewals, which could be seen as a reflection

of the competitivness of certain units or brands within a basket of

select or successful malls

Developers and retailers are required to work together towards creating sustainable long-term developments


RETAIL RENTAL TRENDS

35%

30%

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20%

15%

10%

5%

0%Abu Dhabi Dubai

Increased Decreased

60%

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40%

30%

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10%

0%Increased

OUTLOOK ON RENTAL RATES

Decreased Stable

Abu Dhabi Dubai


As of Q4 2009, total shopping mall supply in Dubai amounted to almost 2.3 million m2 of gross leasable area (GLA). With well managed shopping malls in Dubai currently enjoying virtually 100% occupancy ratios, the indicators for demand for retail space will be found in the length of waiting lists for space. The average market rent for line stores in shopping malls is currently US$ 630 per m2 pa, with premiums of US$ 1,000 per m2 pa. Department stores, due to the large unit sizes, have an average rental rate of US$ 350 per m2 pa, amounting to 40% lower than the rental rate offered to line stores. Anchor stores have an average rental rate at US$ 250 per m2 pa.

Retail space in Dubai is taking shape across the city in a few different forms (Business tower podiums, strip boulevards, etc.) 2010 and 2011 will be characterised by residential community-oriented malls, with the exception of Mirdiff City Centre, and 2013 is expected to see a reinvigoration of the destination shopping mall concept with the first phase of Mall of Arabia in Dubailand.

Destination shopping malls are designed and positioned to have the widest possible market appeal. They are characterised by their elaborate and extensive entertainment components ranging from ski-slopes to bowling alleys, diverse food and beverage offerings, multi screen cinema complexes and family entertainment centres. Tenant selections include comprehensive portfolios of popular international brands, from high end, luxury brands to unique boutiques to mid market and lower price point value outlets.

Given the demand and appetite for shopping in Dubai it is therefore not surprising that

the current supply of retail space in Dubai is more than double that of any other Gulf state, excluding Saudi Arabia. It must, however, be borne in mind that Saudi Arabia has a population in excess of 20 million people compared to a population of 1.7 million in Dubai. Moreover, there is more retail space currently under development in Dubai and Abu Dhabi than in any other Gulf state, including Saudi Arabia. This means that both currently as well as in the foreseeable future, Dubai will have a significantly higher ratio of retail space per head of population than any other Gulf state.

The shopping mall supply is due to an increase by 30% between beginning of 2010 and end of 2013, the market is expected to be oversupplied by over 1 million m2 of GLA in 2013. However, having said that, it is of importance to point out that the demand rate is calculated based on Dubai nationals and residents and does not take tourist demand into account.

Despite an upbeat outlook by local retailers, the current situation in the global economy, with several leading global economies already in recession, is likely to affect the retail sector in Dubai if not directly then indirectly. The rental market for shopping malls in Dubai is expected to move towards a correction phase over the next year, though the process is being hindered by the developers: whilst retail leasing consultants are trying to achieve more competitive, sustainable rents in order to continue to entice retailers into forthcoming malls. Developers are still seeking highest achievable rents and to pre-lease the mall prior to completion.

Despite the economic conditions, the major shopping malls enjoyed a 100% occupancy level through 2009 and the first half of 2010.

Q3 2010

AVERAGE RENT (US$/m2 pa) 750

PREMIUM RENT (US$/m2 pa) 1,000

OCCUPANCY RATE (%) 93

MARKET INDICATORS

RESEARCH REPORT I DUBAI I RETAIL I THIRD QUARTER I �0�0

Shopping mall space is set to increase by approximately 30% between 2010 and 2013.

AVERAGE SHOPPING MALL RENTAL RATE

2,500

2,000

1,500

1,000

500

0

US$

per

m2 pa

Line

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Maj

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Rental rates in shopping malls have remained relatively stable between Q3 2009 and Q1 2010

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

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0

m2 G

LA

2008

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2009 2010 2011 2012 2013

CUMULATIVE SHOPPING MALL SUPPLY

Growth Rate

RETAIL FORTHCOMING DEVELOPMENT SNAP SHOT

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

m2 GL

A

Al Madina Mall Mall of Arabia Phase I

Dubai Pearl Mall


Over the past nine years Abu Dhabi has seen a marked change in its retail landscape. The opening of Marina Mall and Abu Dhabi Mall in 2001 represented an industry watershed in that it precipitated a shift towards the development of destination shopping malls. Since then, the shopping mall industry has grown rapidly and the city today offers shopping malls designed and constructed to international standards. With the partial opening of Dalma Mall in Mussafah earlier this year, the supply of leasable shopping mall space in Abu Dhabi is currently estimated at 542,450 m² GLA. For the purpose of analysing Abu Dhabi’s retail environment, Colliers International only accounts for standalone shopping malls no smaller than 5,000 m2 NLA.

Whilst the current depressed state of the global and local economies has undoubtedly had a negative effect on overall spending power and consumer confidence, the impact thereof is expected to be less severe in Abu Dhabi than in neighbouring Dubai. The retail market in Abu Dhabi is less dependent on tourist spend than Dubai, and is supported by the proportionately stronger spending power of UAE nationals driven by a high per capita disposable income.

The success enjoyed by retail malls in Abu Dhabi is reflected in the relatively high rental levels commanded by recently completed malls. Annual rents for large anchor tenants average US$ 175 per m², whilst average rates for line stores are almost US$ 900 per m² per annum in established malls.

The supply of formal mall space in Abu Dhabi, currently standing at 542,450 m², is set to increase significantly in the next five years. Overall supply is likely to increase to 874,500 m² in 2013 and almost 1.1 million m² by 2015. This represents an overall growth in supply of almost 112% over current supply. Future supply figures are however subject to all current completion dates being met and the re-activation of projects currently scaled back, to be in time for completion by the end of 2015.

Demand for retail space on the other hand currently stands at approximately 1.1 million m2. This is based on accepted international models for the assessment of demand for retail space in developed communities. Subject to population growth estimates being realized, demand is expected increase by 2013 to 1.4 million m2 and increase further to 1.6 million m2 by 2015. Based on the current permanent population, Abu Dhabi is currently substantially undersupplied to the extent of 678,270 m². The undersupplied position will continue through to 2013 reducing to 547,170 m². By 2015 the market is likely to have moved into an oversupplied position of 439,380 m². This supply is however expected to be absorbed to a large extent, if not completely, by growing tourist demand for retail amenities.

Despite immediate concerns over the growing competitiveness in the retail industry and current economic conditions, Colliers remains positive in regard to the Abu Dhabi retail market over the short to medium term.

According to the Abu Dhabi Urban Planning Council, retail spending in the emirate was estimated at US$ 5.2 billion last year.

RESEARCH REPORT I ABU DHABI I RETAIL I THIRD QUARTER I �0�0

The retail sector in Abu Dhabi is less dependent on tourist spending than Dubai, as it is supported by the proportionately stronger spending power of UAE nationals.

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

m2 G

LA

2009

60%

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0%2010 2011 2012 2013 2015

AVERAGE RETAIL RENT1,000

900

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700

600

500

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300

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100

0

US$

per

m2 pa

Line Store Anchor Store

Estabished and successful New Release

RETAIL SPEND BY CONSUMER GROUP (2009) IN US$ BILLIONS

Tourists, 0.6

Non-Citizens, 2.5

Citizens, 2.2


Growth Rate

As of end of 2010 Colliers estimates Abu Dhabi’s retail sector to reach approximately 609, 690m2 of GLA, an increase by 55% over 2009

Q3 2010




MARKET INDICATORS


By end of 2010, Doha is estimated to consist of over 630,000 m2 of GLA of retail space, an increase by 31% over 2010. Historically and currently the market is still undersupplied and despite extensions by a number of existing shopping centres in recent times, demand continues to exceed supply. This is supported by the increasing interest amongst retailers and thus the high absorption rates experienced by recently completed shopping malls.

Whilst neighboring countries was significantly hit by the global economic downturn, it had very limited effect on the Qatar economy and the country has continued to experience strong economic growth. Qatar GDP per capita is the highest in the world, currently at US$ 86,000, which indicates high discretionary disposable incomes and a strong purchasing power for Qatari residents.

Despite 8% decrease in rental rates for line shops, from US$ 720 per m2 per annum in Q1 2010 to US$ 660 per m2 per annum in Q3 2010, retail rental rates in Doha are still amongst the highest in the Gulf region. Highest rental rates is currently being achieved by a UAE based shopping mall developer at US$ 750 per m2 pa, which is 14% above market average. Due to the success and introduction of a new shopping mall concept to the Doha retail sector, Landmark shopping mall has successfully managed to avoid the downward rental trend across market, whilst other shopping malls was severely affected and registered rental reductions of up to 20%.

A large number of retail developments are currently under development, which puts Doha amongst the highest growing cities in terms of m2 GLA. Research conducted by Colliers International shows that there are currently 275,500 m2 of GLA under construction to be delivered to the market between 2010 and 2011. Cumulative supply

by 2012 is expected to reach approximately 760,000 m2 GLA. The forthcoming supply figure by 2012 has been scaled back by 8% due to projects delays as well projects being put on hold.

As new supply is delivered, market conditions are likely to become more competitive and absorption rates along with rental rates are expected to drop. With most of the forthcoming supply aimed at the upper end of the market the impact of the additional supply will be greater in this sector. However having said that, despite the fact of decreasing rental rates, Doha retail sector is currently booming as international retailers are enticed to enter the market where they have the highest GDP per capita in the world.

As retail markets grow so does the demand for new brands in the new developments. Better marketing and management strategies will be critical if the older centres are to continue to offer competition to new developments. Diversification is the most obvious way in which retailers are seeking to minimize the risk of potential over-supply. The trend towards diversification can also be seen in the new development of shopping centres in regions outside Doha.

800,000

700,000

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200,000

100,000

0

m2 G

LA

2009

Shopping mall supply to reach over 630,000 m² of GLA by end of 2010, an increase by 31% over 2009

RESEARCH REPORT I DOHA I RETAIL I THIRD QUARTER I �0�0


Line shop rental rates in shopping malls currently average US$ 660 per m2 pa, with premium rent at US$ 750per m2 pa

Shopping malls have registered 8% decrease in average rental rate between Q1 2010 and Q3 2010

35%

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0%2010 2011 2012

Growth Rate

Q3 2010


PREMIUM RENT (US$/m2 pa) 750

OCCUPANCY RATE (%) 90-95

MARKET INDICATORS

Rental Rate Total GLA (US$/m2 pa) Units (m2)

DOHA CITY CENTRE 750 380 303,000

VILLAGIO 690 200 153,000

LANDMARK 660 120 58,000 SHOPPING MALL

HYATT PLAZA 630 74 27,000

DOHA SHOPPING MALL PERFORMANCE

SHOPPING MALL RENTAL RATES Q3 2010

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Forthcoming shopping mall supply is expected to increase by 20% over the next two years

CHANGE IN SHOPPING MALL RENTAL RATE

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Q1 2010 Q3 2010

P. �0 I COLLIERS INTERNATIONAL

Retail space that has followed the delivery of Panorama Mall in early 2010 comprises mostly neighbourhood centres anchored by a hypermarket. These developments are located in close proximity to low-density residential areas due to high competition for land around Riyadh’s major CBDs. New neighbourhood centres typically range from 20,000 m2 to 35,000 m2 with an average of 30% of its available space allocated to a hypermarket anchor tenant and possibly limited space allocated for a FEC (Family Entertainment Centres).

Riyadh’s current operating retail stock remains generic in terms of structure, activities and leisure offering. There are a handful of shopping malls planned; however, the core concepts of these developments are not diversified enough to provide the novelty of “experience retail”. Rising disposible income and limited leisure offerings in the City pave the way for destination mall concepts a segment of the market that remains untapped in Riyadh.

Riyadh Gallery, Hayat Mall and Granada Mall remain the City’s top three malls with an average daily footfall of 31,200 - a 6% increase over Q3 2009. These malls’ major attractions are entertainment centres with over 24,000 m2 of combined available space.

Riyadh’s retail market has proven resilient to the onslaught of the global economic downturn considering that it is one of the biggest sources of entertainment and leisure. High disposable income, strong consumer confidence and lack of entertainment venues have sustained the growth in the retail sector.

Softening of rents has been minimal at an average of 3% for new retail space and less established shopping malls. However, rents have remained stable for well positioned malls, if not increased. Big

Box tenants in Riyadh continue to lease space at an average rate of US$ 135 per m2 per annum while line shops have an average lease rate of US$ 470 per m2 per annum, exclusive of service and electricity charges. Assessing the retail market from a GLA Per Capita prospective (i.e. estimated at 0.29 m2), North and North East Riyadh remain undersupplied with retail facilities considering the growing population. With Riyadh’s retail supply expected to increase by over 7,00,000 m2 before end of 2013. As per planned developments, the forthcoming retail development will largely be located on the Ring Roads and other suburban areas with easy access through high speed arteries. Over the coming three years, retail stock will increase but not as dramatically as witnessed over the last five years.

Subject to population growth estimates being realised, demand for retail space is expected to reach over 1.9 million m2 by 2015. Riyadh still holds potential for further retail developments; however, developers should consider experience concepts that will offer a combined variety of retail and leisure activities.

A shift towards community or neighborhood size developments may now be seen, which will help boost different retail formats.

With the exception of the recently delivered Panorama Mall, “the experience retail” offer is not obvious in the quantified forthcoming supply

RESEARCH REPORT I RIYADH I RETAIL I THIRD QUARTER I �0�0

North and North East Riyadh remain undersupplied with retail facilities considering the growing population

3,000,000

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m2 G

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2009


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Growth Rate

Riyadh’s retail supply is expected to increase by over 7,00,000 m2 before end of 2013

Q3 2010




MARKET INDICATORS

TOURISTS BY PURPOSE OF VISIT

Leisure/Shopping VFR Business/MICE Others

7%22%

29%

42%

AVERAGE RETAIL RENT

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Hypermarket Anchor Store

Non Hypermarket Anchor Store

Line Shop

P. �� I COLLIERS INTERNATIONAL

Jeddah’s retail market grew by over 10% in available net lettable supply over the past year with the delivery of Jeddah Riviera Mall and a handful of neighbourhood malls. Recent and forthcoming construction projects show a tendency towards “box-type” structures that include entertainment areas geared for young consumers, and retail chains that offer different types of commodities to provide a ‘one-stop’ shopping destination. This trend has served as a catalyst to the growth of shopping malls in the City featuring hypermarket anchor stores, which mimic established and successful retail schemes seen in the UAE. In this type of format, developers are targeting a diverse tenant mix and strong level of footfall, which necessitates the provision of increased food and entertainment.

The Mall of Arabia, Red Sea Mall, Al Andalus Mall, Stars Avenue Mall and Serafi Mega Mall are Jeddah’s leading shopping malls and, compared to their counterparts, have allocated a large amount of space for family, food and entertainment centres (FEC) totaling over 63,000 m2. The market share of branded apparel has been increasing steadily over the past decade due to changes in consumer tastes and converging global fashion trends. Saudi consumers have become increasingly sophisticated, demonstrating brand awareness and brand loyalty. Apparel outlets range from exclusive boutiques carrying haute couture and top international designer labels to established local trade stalls. Riyadh still has the largest market for retail apparel in Saudi Arabia accounting for around 40% of total apparel sales, compared to around 30% in Jeddah. Jeddah has a larger proportion of mid-tier brands due to the large number of pilgrims that arrive annually in the City en route to Makkah and Madinah, while Riyadh

has a wider high-end market due to a larger number of wealthy consumers. Market-wide footfall grew by 4% in Q3 2010 compared to the previous year due to an increase in the number of Pilgrims that visited the City this year. Although the number of retail voids experienced minimal decline, rental levels have remained stable as retailers expect that the decline in occupancy is only short term.

Hard voids - units that are empty and are available for occupation - grew by 5% in 2010, while soft voids - those available but currently trading, declined by 2%. Average retail occupancy in Q3 2010 stood at 85%, while net lettable stock absorption in Q3 2010 registered a 4% decline compared to the previous year.

Jeddah’s shopping mall stock is expected to grow by over 689,000 m2 GLA by 2017, with a sizeable proportion of supply expected to enter the market by 2011. Competition is expected to accelerate as more supply is delivered, which will force landlords to adjust their rents accordingly to maintain high occupancy rates. Increased competition may also result in the construction of better quality shopping malls with enhanced leisure activities as landlords compete for tenants. The rejuvenation of existing malls will help bring about a better quality of development. It is thought that this situation will promote an increase in quality and strength of management of malls.

The rejurination of existing product will help bring about a better quality of development. It is felt that this situation will promote the increase of quality and strong management experience of centers and malls. It will be these malls that shall maintain occupancy and new stock shall rely on credible advisors and management experience.

1,600,000

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

m2 G

LA

2009

Jeddah’s retail market grew by over 10% in available net lettable supply over the past year

RESEARCH REPORT I JEDDAH I RETAIL I THIRD QUARTER I �0�0


Jeddah accounts for around 30% of retail apparel of market

AVERAGE RETAIL RENT

800

700

600

500

400

300

200

100

0

US$

per

m2 pa



Line Shop

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%2010 2011 2012 2013

Growth Rate

Jeddah’s shopping mall stock is expected to grow by over 689,000 m2 of GLA by 2017 with a sizeable number of supply expected to enter the market by 2011



7%22%

29%

42%

Q3 2010




MARKET INDICATORS


Dammam and Al Khobar’s retail supply has historically been characterised by neighbourhood stores and outlet centres with a gross lettable area (GLA) ranging from 20,000 m2 to 50,000 m2. The rise of modern and bigger shopping malls started in 2007 to 2008 with the delivery of three malls, effectively increasing retail supply by over 60%. Growth has continued in 2010 with the delivery of Dareen Mall and Al Othaim Dammam before the yearend adding over 129,000 m2 retail GLA.

Although net stock is growing, it is not at the same pace witnessed in Saudi Arabia’s other major cities such as Riyadh and Jeddah. This can be attributed to the propensity of residents and tourists in Dammam and Al Khobar to conduct their shopping in neighbouring Bahrain, especially at weekends. However, with a limited number of leisure venues in Dammam and Al Khobar, shopping remains a major leisure activity for families.

Operating malls tend to follow a “box-type” structure with minimal attempt to differentiate, while retail brand offerings are generic. Newer malls have been allocating an increasingly larger proportion of space to food and entertainment centres in an attempt to attract families, who deliver the largest proportion of retail spend in Saudi Arabia. In the face of increased competition and new market practices, some of the older and poorer quality properties have undergone renovation and rebranding in an attempt to remain competitive. This process has largely been unsuccessful, with the newer and larger properties continuing to capture a sizeable market share. Some neighbourhood stores and outlet centres have, however, managed to reposition themselves as lifestyle centres

successfully carving a niche market and drawing in local shoppers.

The smaller and older properties are typically located in Dammam. There has been a shift in location preference, with newer centres generally located in Al Khobar, which now accounts for the bulk of retail centre supply. In part, this reflects the greater availability of land in Al Khobar and a general shift in the focus of new development of all types towards this city. It is also a reflection of the higher income profile of residents in Al Khobar.

The number of retail voids experienced minimal decline, while rentals have remained stable as retailers expect that the decline in occupancy is only short term. Hard voids - units that are empty and available for occupation - grew by 4%, while soft voids - those available but currently trading - declined by 3%. Average retail occupancy in Q3 2010 stood at 90%

Dammam and Al Khobar’s shopping mall stock is expected to grow by over 459,000 m2 GLA before end of 2013, with the majority of forthcoming supply expected to enter the market in 2011. However, initial plans for these shopping malls indicate that, although there is a wider provision for leisure activities, there remains little difference between the proposed schemes in the pipeline and those malls that are currently operating. With retail supply in Bahrain closely mimicking that in Dammam and Al Khobar, and both cities representing the third largest market share in retail apparel consumption in Saudi Arabia (accounting for 20%), the potential lies in developing destination malls such as super-regional centres or themed/festival centres.

Dammam and Al Khobar’s retail market grew by over 129,000 m2 GLA over the past year

RESEARCH REPORT I EASTERN PROVINCE I RETAIL I THIRD QUARTER I �0�0


Hard voids-units that are empty but available for occupation, grew by 4% while soft voids-those available but currently trading, declined by 3%

AVERAGE RETAIL RENT

700

600

500

400

300

200

100

0

US$

per

m2 pa



Line Shop

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

m2 G

LA

2009

60%

50%

40%

30%

20%

10%

0%2011

Growth Rate

2010 2012 2013



17%

12%

32%

39%

Q3 2010




MARKET INDICATORS

Dammam and Khobar’s shopping mall stock is expected to grow by over 495,000 m2 GLA before end of 2013


Old souks (markets) in Damascus, while catering to the low to middle income segment of the population, are a major attraction for tourists and day visitors from neighbouring countries. Other high street retail areas, including Al Hamra and Al Salhiya, target the upper middle segment of the population. Primarily, these souks offer, locally manufactured products and brands. International brands and quality local brands are centred in the upscale areas of Al Sha’alan and Abu Rumaneh, attracting wealthy Syrians who previously did shopping in Lebanon, Jordan and the GCC. The market is dominated by garment retailers as opposed to consumer electronics and appliances.

The retail market in Damascus has recently witnessed a major transformation with the introduction of the shopping malls concept. The concept was first introduced by the completion of the first standalone retail development in Syria, Town Centre, in 2004. The shopping mall concept, proving to be popular amongst Syrians, was expanded and various new shopping malls were being developed. In 2007, Cham City Centre, located in Kafr Sousa, was completed. In the same year, another mall, Skilnad shopping mall, was also completed. Damasquino Mall, the latest addition to Damascus’s shopping malls, was opened in late 2008. The mall, compared to other shopping malls, was successfully able to attract more international brands.

Strong demand fundamentals substantiate the development of shopping malls in Damascus. A young population – the majority of Syrians are under the age of 30 – and a high rate of population growth are major demand drivers. Moreover, the sector is supported by the popularity of shopping and dining as major leisure activities. The increasing income of the average Syrian, resulting from economic reforms and growth, has also strengthened demand for retail products in the city. Driving demand for retail products to higher levels is the increasing tourism inflows

to Damascus and the large population of Syrian expatriates. Driven by solid demand fundamentals and little competition, some of the major retail groups in the region have announced plans to enter the Syrian retail market. Majid Al Futtaim Group (MAF) has announced that it will develop what will be the largest shopping mall in Syria, spreading on 200,000 m2 of GLA, in its master plan development in Ya’afur. Emaar –IGO is also planning to develop a large shopping mall of approximately 100,000 m2 of GLA in the Eighth Gate master planned project. Large retail offering is an important component of most of the major master-planned projects in Damascus.

Shopping mall supply is expected to more than triple over the next five years, signalling investor confidence in the popularity of malls in Syria. Even with such an increase in future supply, total supply will be less than the supply in other major cities in the region. Supply in Damascus is expected to reach 0.1 m2 per capita by 2013, compared to 1.3 in Dubai and 0.6 in Doha. The amount of forthcoming supply, however, is a source of concern. Lower purchasing power in Damascus compared to other regional cities casts doubts on the ability of demand to absorb future supply. Leisure and entertainment facilities and the careful selection of tenant mix shall offset the risks of oversupply in the market.

This is a market that retailers and developers should make a strong in-roads towards. However project “selection” remains a key word.

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

m2 G

LA

2008 20102009 2011

An increase in the number of tourists coupled with an increase in consumer purchasing power has increased retail spending

Average annual rent in high street retail is currently US$ 2,400 per m2

2012

Q3 2010

AVERAGE RENT (US$/m2 pa) 2,415


MARKET INDICATORS

RESEARCH REPORT I DAMASCUS I RETAIL I THIRD QUARTER I �0�0

CUMULATIVE RETAIL SUPPLY

AVERAGE RETAIL SALES PRICES

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

US$

per

m2

Al S

haal

an

Al H

amra

Str

eet

Ham

ediy

a

Abu

Rum

anah

Salh

iya

Many international brands, following the removal of import restriction, have established presence in Syria

Shopping mall supply is expected to increase by 365% over the next five years

COMPLETION DATE GLA (m2)

MAF Developments 2012 200,000

Emaar’s Eighth Gate 2012 92,000

FORTHCOMING SUPPLY SNAPSHOT

* This table does not constitute an exhaustive list of forthcoming supply

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

US$

per

m2 p

a

AVERAGE RETAIL RENTS

Al S

haal

an

Al H

amra

Str

eet

Ham

ediy

a

Abu

Rum

anah

Salh

iya


RESEARCH REPORT I CAIRO I RETAIL I THIRD QUARTER I �0�0

The market has undergone a renaissance over the past few years, bearing a direct correlation to the series of economic reforms implemented under the premier- ship of Ahmed Nazif, fostering a new sense of consumer confidence, in terms of both demand and supply. The reduction of customs duties on goods in 2005 from a tax band of 100-150% down to 20%, represented a crucial first step in stimulating interest from international retailers in the Cairo market, always considered one of great potential given its large domestic consumer base.

Average rental rate has registered 12% decrease between 2009 and Q1 2010 from US$ 720 per m² to US$ 630 per m² per annum. Nile City Towers Mall recorded the largest decrease at 34% from US$ 1,000 per m² to US$ 660 per m². Despite an average rental decrease across the retail sector, shopping malls such as Hyper One and Rehab Mall 2 witnessed increases by 3% and 29% respectively. Retail rental rates have remained stable in Q2 and Q3 2010. Current average sales price for high street retail units averages US$ 3,790 per m².

Existing shopping mall supply, as of end of 2009, reached over 485,000 m² of GLA. By end of 2010, this supply is expected to increase by 16%, reaching a total supply of approximately 565,000 m² of GLA. Continuous growth in supply is expected over the next three years, leading to a cumulative supply of 1.68 million m² of GLA by 2013, provided construction proceeds as planned. Forthcoming shopping mall supply is mainly developed within mixed use development in New Cairo and 6th October.

As of end of 2010, demand for shopping malls is estimated to reach 1.6 million m2 of GLA. Provided scheduled completion dates

are met, total shopping mall supply will reach a level of approximately 565,000 m2 GLA, which is translated to a continuous undersupply for the coming three years. Although the population is forecasted to continue to grow at an annual rate of 1.2%, the increase in supply for the coming three years by 197% is expected to lead to market equilibrium in 2013. Depending on the demand dynamics for the coming three years, the retail sector runs the risk of translating into an oversupply in 2013.

The two-pronged strategy of brand diversification and provision of leisure amenities will become more significant to future mall performance as more retail supply enters the market over the next few years, particularly in light of the considerable retail space planned within residential compounds in the 6th October and New Cairo. The decisive factor impacting on standalone mall performance will be the degree ‘pulling power’ achievable by the development.

Colliers feel that a strongly developing middle income population coupled with an extensive large overall populous Egypt will be in the top 5 countries within the region brands will want to be represented.

(US$/m2)

ZAMALEK 5,220

HELIOPOLIS 3,720

MOHANDSEEN 5,100

MAADI 1,400

NASR CITY 2,320

DOWNTOWN 5,970

GIZA 3,100

6TH OCTOBER 2,560

NEW CAIRO 4,720

HIGH STREET RETAIL SALES PRICES

High street retail sales prices average US$ 3,790 per m2

Cumulative shopping mall supply is expected to reach approximately 1.68 million m2 by 2013

1,800,000

1,600,000

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

m2 G

LA

2009 20112010 2012

60%

50%

40%

30%

20%

10%

0%

High Income earners in Greater Cairo is estimated to approximately 1.4 million

2013

Rental Rate Total GLA (US$/m2 pa) Units (m2)

CITY STARS 900 550 150,000

DANDY MEGA MALL 600 320 122,000

HYPER ONE 550 27 20,000

NILE CITY TOWERS MALL 660 44 12,000

REHAB MALL 2 440 217 6,000

THE FIRST MALL 880 61 5,000

CAIRO SHOPPING MALL PERFORMANCE

Rent for high-end retail malls has remained stagnant over first and second quarter of 2010 at US$630 per m² pa

Q3 2010




MARKET INDICATORS


Growth Rate

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0

US$

(Bill

ion)

2008 / 2009

GOVERNMENTAL TAX REVENUES

2009 / 2010

Corporate Income Tax Proceeds Sales Tax Proceeds

Customs Revenue


In the mid to late 1980’s the retail industry in Tripoli underwent a movement from state-owned to private sector controlled retail. This was supported and encouraged by the government because of the much needed employment opportunities that accompanied the process. Initially the retail offering in Tripoli was comprised entirely of street facing stores along routes such as Gargaresh Road, Rashid Street, 1 September Street and Bin Ashour Street. The few shopping centres that did exist, such as the two Zakher Al Yamama centres, were small centres (less than 2,500 m² GLA each) with little if any consideration given to tenant mix or modern mall management techniques.

The retail market has however undergone considerable growth in the last few years with the opening of some shopping malls, albeit small in size such as the Oasis Centre and the Al Mahary Supermarket. Retail units previously owned by the government have been taken over by private enterprise. With these developments came the introduction of a number of recognised international brands such as Adidas, Benetton, Damas, Mango, Next, BHS and Marks & Spencer. The popularity of these stores is indicative of a strong brand awareness amongst Libyans and a growing demand for a more formal retail environment in Tripoli. Given the undersupply of formal retail space in Tripoli there can be little doubt that the mall being constructed by LIDCO on the airport road will be well supported.

Whilst the majority of Libyans still have relatively low levels of discretionary disposable income (recent reports indicate an average national percapita income of US$ 13,450 p.a.), strong

growth rates and stable economic environment experienced by the country in the recent years have increased consumers’ disposable income. Whilst this may restrict the potential for rapid expansion of the industry the recent substantial salary increments awarded to the public sector are expected to increase overall purchasing power. As mentioned above, however, international brands are popular with higher income groups and this will underpin the success of future retail brands when they enter the broader market.

Generally, there is a moderate volume of additional stock being added to the market with the average GLA per capita remaining very low by regional standards. A positive demand for good quality retail space in Tripoli is evident by the high occupancy rates enjoyed by most retail properties in the city, Oasis Centre being an exception due to its positioning.

This is a market to watch. Many new developments are being activated, most have a retail and hospitality component. As such there will be a need to find occupiers thus making it an attractive long term view.

Retail sector characterized high occupancy rates derived into high demand.

The forthcoming supply for shopping malls as of Q3 2010 is in excess of 75,000 m2 GLA

Q3 2010




MARKET INDICATORS

RESEARCH REPORT I TRIPOLI I RETAIL I THIRD QUARTER I �0�0


m2 GLA

SOUK AL JOUMAA 10,000

SOUK EIN ZARA 10,000

ANDALUS CENTRE MALL 15,000

SOUK AL ANDALUS 15,000

AL WAHA COMPLEX 24,000

SNAPSHOT FORTHCOMING SHOPPING MALL SUPPLY

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

m2 G

LA

20112010 2012 2013

AVERAGE SHOPPING MALL RENTAL RATES

700

600

500

400

300

200

100

0

US$

per

m2 pa

Oas

is C

ompl

ex

Souk

Al T

hula

tha’

s Co

mpl

es

Al M

ahar

y Su

perm

arke

t

Al F

atch

Tow

er

Palm

City

Ret

ail

Com

plex


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REgiOnal REsEaRcH cOntacts

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