Hanging on in there

With the V5 development in the pipeline, Verdun might just survive the retail assault from the BCD. Others remain unconvinced

For the time being Verdun is still Beirut’s leading shopping district. This is the verdict from retailers and real estate brokers alike, who despite acknowledging that the area will eventually feel the pinch from Beirut’s Central District – believe that Verdun has the ‘critical mass’ to weather the storm

However, many experts feel that this optimism for the district’s viability may generate overly optimistic business initiatives – such as the proposed $120 million, V5 shopping center with its planned 50,000m2 of net retail space, and another 12,000m2 development adjacent to the Concord Galleria in northern Verdun, which experts say will firm up both ends of the shopping district.

In the meantime, the jewel in the crown of Verdun remains the Dunes commercial center, which with its Holiday Inn, cinemas, food courts, amusement arcades and shops – is arguably the most successful multi-purpose retail development in the country. The complex, which attracts Gulf Arab shoppers in particular, is a center piece of the shopping district.

“Samir Rayess [the Dunes center’s owner] has got it right,” said Raja Makarem of RAMCO, real estate consultants. “He’s got a winning formula. It’s clean, well managed and he’s finessed the leisure concept in the basement. It works. He’s understood that when Gulf Arabs come here in the summer, they don’t sunbathe. They stay indoors during the day and go out at night.” Makarem traced much of the center’s success and popularity to what he described as its most significant anchors: its cinemas, and the two major local brands, GS and Aishti. “Dunes has more to offer than Verdun 732,” he said. “It’s a more complete concept. Verdun 732 is anchored by two cafes.” Unlike the original owners of Verdun 732 and Verdun 730, Rayess has resisted the temptation to sell his retail space, making it easier for him to replace non-performing tenants. “If they don’t do well, I can put someone else in,” he said, sitting in his office in the Dunes center. “I can say: ‘I’m going to have five jewelers, five ladies’ wear, two men’s wear, four footwear,’ because I know that’s what will generate the highest turnover.”

Naturally Rayess is bullish about Verdun’s retail future and believes the controversial V5 project will only add to the area’s profile. “It will strengthen the position of Verdun Street. It is not only a mall for Verdun. It is a mall for Beirut,” he said. Asked if the complex would be able to attract enough shoppers, Rayess responded with an emphatic “yes.” He predicted that foremost among the center’s patrons would be Gulf Arabs, who constitute Verdun’s commercial lifeblood. Makarem, whose company is involved in the V5 project, supports Rayess’ claims. “No Gulf tourist comes to Beirut without visiting Verdun,” he said. If completed, the Hariri Group and Kuwaiti-financed mall, to be situated at the lower end of Verdun, would offer five times as much retail area as the ABC in Dbayeh, and nearly 20 times that covered by the Dunes center. Yet not everyone is so positive about the new mega shopping development. “We don’t have the roads for a shopping center that size,” said Michael Dunn, managing director of Michael Dunn & Co. Real Estate Consultants. “It would need huge amounts of parking. But the main thing is we don’t have enough people within an approximate five-minute drive time to make it work. Who’s going to go there? It’s just going to be a big, hairy white elephant.”

Georges Salti, development manager of the Daher Group, which owns Zara and Mango in Lebanon and is one of Verdun’s biggest retailers, echoed Dunn’s doubts.

“You cannot build a 90,000 square meter commercial center on six levels, in a small street, which you need 35 minutes to get to from, anywhere in the world,” he said. Easy access, he stressed, is a vital contributor to the success of any shopping center, as is the golden rule that only in rare instances must it exceed two levels, and never three. Detractors also point to the fact that the 7,000m2 plot upon which V5 will be built, indicates that the center would possibly rise as high as seven stories. “It just doesn’t work,” said Dunn. “Shopping centers only work, in the ideal world, on two levels. Perfect is one. Two works because people will walk up one level. But three levels don’t work unless you’re in Manhattan or Tokyo, where there’s a shortage of land. In Beirut, we don’t have a shortage of land.”

The outlook for V5 is rendered even bleaker, critics warn, by the anticipated emergence of downtown as a prime shoppers’ destination and the mushrooming of more accessible commercial centers on the outskirts of the capital, such as the ADMIC project in Dbayeh. Makarem believed there is room in west Beirut for a big shopping center, and that Verdun would be an ideal location for it. Verdun’s critical mass would, he argued, ensure that a steady-enough flow of V5 customers would be generated. He said it was highly likely the project would be implemented. “I can’t see it not materializing,” he said

Even though Verdun may have lost the confidence of the super brands – Gucci and Tod’s for example – the area still boasts nearly 30% more international brands than the BCD. “With all the brand names that you have in Verdun, it is still the number one destination in Beirut for shopping,” said Rayess. Nonetheless, by July 2003, 17 retail outlets – of which eight were international – had closed in Verdun since 2002. The good news is that most of the outlets were rapidly replaced. Dunn said he expected rents for retailers in Verdun to dip further, as the BCD gains momentum. They have already declined by 20% over the last couple of years to $800/m2, as tenants failed to do the kind of business that justifies high rents. Revenues would also “take a hit,” he predicted. Makarem echoed Dunn, predicting a “healthy” drop in rents, with the BCD constituting the benchmark.

Overall though, industry insiders say, Verdun will remain fairly stable, despite the ripples spawned by an invigorated BCD. Verdun will be to Beirut what Passy and St Germain des Prés are to Paris, Dunn suggested. “There are enough shops and enough people to go shopping in them,” he said. An energized downtown retail sector could even, some observers say, create a spin-off effect that actually boosts demand in Verdun. “We will complement each other,” said Salti. “There will definitely be serious competition between downtown and Verdun,” predicted Makarem. “But I think they will both survive. Verdun is an established market. There is room for both. We could end up with healthy competition – which would be of benefit to the market and the public.” For his part, Rayess said: “Even when the souks are operational, Verdun will continue to be a leading destination for shoppers.” He pointed out that his GS and Timberland retail outlets in the Dunes center were registering an increase in revenues of more than 10% a year, despite the emergence of the BCD.

Nonetheless, Salti did acknowledge that the Daher Group’s plans for Verdun do not extend beyond 10 years at the most, because of the unpredictability of the Lebanese market. “We don’t know if Verdun is going to perform beyond ten years. Things might change in five or six years,” he said. “The clients might go somewhere else.”