Saturday, August 02, 2008

Dubai's retail world, much in demand, despite high rents

mall of emirates
According to latest research, the highest rental rates in Dubai are not in residential sectors, as is often believed, but in the retail world.

The retail rent rates in Dubai, have not risen significantly ever-since the first quarter of 2008, with high-end retail locations such as BurJuman and Mall of Emirates fixing rents in the range of Dh.400 to Dh.600 per square foot.

Average retail rent rates are fixed at Dh.600 per square foot in Dubai, and Dh.400 per square foot in Abu Dhabi.

According to data from Jones Lang LaSalle, average rent for convenience stores and neighborhood centers is Dh.200 to Dh.250 per square foot. But in the case of regional and super regional centers, the rate goes up to Dh.400 to Dh.550 per square foot.

But the startling fact is that despite such high rentals, the occupancy rates continues to remain at more than 90 percent, as people are ready to pay heavily for the prized position, in the gleaming retail industry of Dubai.

A report by Colliers International has shown that retail occupancy rates are as high as 98 percent or 100 percent in 'destination' shopping malls, with wealthier Emiratis and expatriates having the means to shop, with the new supply of shopping malls.

According to a commercial review by Better Homes, an international property consultancy group, retail has contributed immensely in increasing the overall sales registration activity during the second quarter of 2008 by 234 percent, as against that during the same period last year.

The review by Dubai Land Department indicates that the total real estate transactions surged 204 percent year after year, from Dh.6.8bn in 2007 to Dh.13.9bn in 2008.

The report by Better Homes explains that the current retail supply of gross leasable area (GLA) in Dubai is 1.6mn square meters. The current demand for GLA is 118,000 square meters, while the intended retail GLA supply towards end of 2008 is just more than 2mn square meters.

In the opinion of Craig Plumb, the Head of research - Mena region at Jones Lang La Salle, the supply of retail floor space per person, at present, is comparatively low in UAE, when compared to more mature markets. Therefore, the market can accommodate the large amount of additional supplies that are currently under development.

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