Shopaholics of the world are in for a super-sized fix as the city that is the home of 21st century superlatives adds not just one, nay two “shopping-est” to its list of epithets. Dubai, having construction already underway on the world’s largest shopping mall, has just made a move to one-up itself in matters retail. In early May, a state-owned development company announced it will start building the “world’s largest shopping area.” It is to be a stretch of retail with shops upon malls upon hotels in a continuous commercial carnival called Bawadi –— offering, in total, 3.7 million square meters of retail space.
The Bawadi development was, until the retail announcement, a 10-kilometer road lined with 51 hotel projects located within the huge Dubailand development that covers a total of 278 square kilometers (equal to about a quarter of the size of Greater London or over five times the surface of Manhattan).
Dubai’s ruler Sheikh Mohammed Bin Rashid Al Maktoum ordered the retail space added to the hotel development almost one year to the day after he initiated the launch of Bawadi LLC in May 2006 as the project company to own and operate hotels, convention centers and retail and entertainment locales.
Moreover, the princely initiative doubles to $54 billion the investment volume of the Bawadi development that will form one axis of Dubailand, which is being built as the emirate’s future entertainment heart — and nota bene, the world’s largest leisure zone-to-be.
Retail space will now be added within and between the hotels in the form of malls, boutiques, street-level shops all connected by subterranean hallways which will be, you guessed it, lined with retail outlets so shoppers can hop from spot to spot without having to go outside. The underground passages were decided on to encourage walking but beat the heat, which can get unbearable in Dubai, explained Bawadi CEO Arif Mubarak.
Malls getting bigger and bigger
The Bawadi company in charge of the project is, also in typical Dubai fashion, a subsidiary of another company, management and real estate development firm Tatweer — which in turn is a member in the corporate family of Dubai Holding, the emirate’s conglomerate of multi-billon dollar enterprises.
Shopping malls will be integrated into the Bawadi project on a massive scale and, like for the hotel projects, the concept bets on intense private sector participation. Less than a month after the retail plan was announced, Bawadi could announce that it inked a joint venture agreement to build the first of the malls with Al Ghurair Investments, a company belonging to the group which opened Dubai’s first shopping mall in 1983.
While he did not say how many square meters of gross leasable area (GLA) this mall will bring to the market once it is completed, Mubarak told Executive that the mall’s first phase alone will be an AED10 billion ($2.73 billion) undertaking expected to reach completion by 2012 with a GLA in the range of 370,000 square meters — this would allow the Phase One to claim the number four spot for largest malls worldwide, based on today’s figures.
By the middle of the next decade, however, the malls of Dubai will have opened in dimensions that will demote any shopping center below 500,000 square meters of retail area to second tier in terms of size.
Currently, two shopping centers on earth advertise themselves as having more than 500,000 square meters GLA, both in China. But the Mall of Arabia, currently dubbed the world’s largest shopping mall project, will have 10 million square feet (930,000 square meters) in GLA after completion of the project’s second phase. It is also located in Dubailand, although in a different part of the development.
Infrastructure and pilings for the Mall of Arabia are in place and the owners intend to start building the structure within a few months’ time. Myra Searle, vice president for retail with the I & M Galadari Group which owns the complex, told Executive the first phase of the mall will take 29 months to complete and have 4 million square feet (372,000 square meters) of GLA. Phase two will be ready five to seven years later and put Dubai at the top of the large-mall food chain.
The developers have projected Mall of Arabia’s total cost at AED32 billion ($8.7 billion). That is a high price for stealing the crown for queen of the world’s malls when compared with the current title holder, South China Mall in Dongguang, a city in the Pearl River Delta. That complex, which opened in 2005 with some 660,000 square meters of floor space, carried a construction price tag of comparatively paltry 2.5 billion Yuan ($327 million), 26 times cheaper than the Mall of Arabia.
One characteristic of the South China Mall is that its more than ten buildings, each three to five floors and themed, are not enclosed under one roof, making it more comparable to the Bawadi development in structure than to other world-leading shopping malls where promoters stress the aspect of offering a single continuous retail area. Bawadi officials on their part avoid the trap of risky “largest mall” record claims through their verbiage of marketing their project as history’s “largest shopping area.”
It’s not the mall, it’s the attractions
Bawadi’s Mubarak predicts that soon more veteran mall developers will jump on the opportunity of adding an outlet in this meta-realm to their portfolio of locations. “You will notice in the coming two months in terms of the names that are going to sign with us, as far as joint ventures or partners, these people have done it before and they know [the mall] business and they have current businesses operating,” he said.
He better be right, because Bawadi’s heralded deluge of retail space — the equivalent of over 544 World Cup regulation football pitches — amounts to over two-and-a-half times Dubai’s total GLA at the end of 2006. If laid out lengthwise, those football pitches would stretch over 57 kilometers and take an Olympian record walker more than five and a healthy average person over 11 hours to walk end to end.
Top ten largest malls
Although size-superlatives help in selling a mall to the public, being the world’s largest mall or shopping area is clearly insufficient to guarantee economic success. That is why management and development firms have dug deep into the ideas box for rolling out attractions that will do better than seasonal sales signs in drawing crowds. A telltale example is Dubai’s current largest mall, Mall of the Emirates. It opened its doors less than two years ago in 2005 with 223,000 square meters of GLA and can already count down the days to when it will lose the top rank in local size.
The Mall of the Emirates’ selling points that set it, at least for a few more years, apart from any competitor, are its indoor skiing area with five slopes and a fountain and man-made lake displaying flame-throwers that spurt fire up to 3 meters, and water jets. The mall is ready for the competition, said general manager Fuad Sharaf. “When you have competition it makes you more creative,” he said. “It makes you come up with more ideas.”
While he declined to let Executive in on any of the new ideas the mall has planned, he said the mall’s non-retail attractions are visitor magnets, and people just come to watch the water-and-fire show every half hour with the flames starting at 7 p.m.
Developing non-shopping attractions and gimmicks like themes are what will set Dubai’s new malls apart as more pop up in the future, opined Himanshu Vashishtha, managing director of market research firm ACNielsen in the UAE. The firm conducted several polls for mall owners to study consumer behavior and opinions.
Mallgoers second in the world
“If shoppers have a choice between two fairly good malls that have everything to offer, then they will get into that next level of, ‘so what else can I get if I go to this mall,’” Vashishtha said.
This kind of value-added destination branding of course is also an important factor in ballooning the costs of a mall project. But neither Mall of Arabia nor another newbie, Dubai Mall, appear to shy away from the extra investments, fully aware that they will determine the projects’ appeal to the public and salability to retailers.
With this in mind, Mall of Arabia has slated construction of a dinosaur theme park along with Phase One. Searle explained that the only way to enter the park will be through the mall. Then one is not to forget Dubai Mall, a project by Emaar Properties which is under construction at the foot of Burj Dubai, the world’s tallest building.
On its web site Emaar describes Dubai Mall as, oh yes, the world’s largest mall. Representatives of Emaar Properties were not available for interviews when contacted but it is known that Dubai Mall will add 344,000 square meters of GLA to the emirate’s retail mix when it opens, as scheduled, in 2008. For special attractions, it is planning a three-story aquarium with tunnels so guests can walk underneath the various sea creatures.
Supplying the malls with a home base of clients is important and it is more than a stroke of luck that residents of the UAE are serious shoppers. A 2005 ACNielsen poll found 80% hit the mall once a week or more “for something to do.” This is the second highest rate in the world behind Hong Kong.
“The trend is more or less the same [today],” Vashishtha said. “If anything, the proportion of people who do shopping for entertainment, or ‘shopertainment’ as we term it in this part of the world, has only increased.”
“Six months of the year you have very hot weather and people definitely tend to seek indoor entertainment,” he said.
“Couple that with the fact that 74% of shoppers enjoy shopping. This is true even when they are just visiting the hypermarket … And it becomes an outing.”
On average, Vashishtha said, those flocking to the mall indulge there for three to four hours each trip. In monetary terms, residents of the emirate spend on average $109 per trip, or just under $5,700 per year.
But for all that shopping space to flourish in future, this is not going to be enough. In a recent publication, the Dubai branch of real estate consulting firm Colliers International projected that per capita GLA in Dubai will amount to 2.35 square meters in 2010, requiring annual sales volumes of $8,400 per capita for retail sector profitability — a 140% increase of what is currently available.
So is all this mall building a viable plan?
“That’s the million-dollar question,” said Searle. “Put it this way: A developer will know that Dubai is over-malled when the retailers no longer lease … At the moment, we have seen no evidence of that taking place.”
Colliers, in the business of marketing real estate opportunities, assuringly said in its report that this forecasted required per capita spend “is not excessive in itself when compared to other markets” — citing average annual retail spends of $8,000 and $12,000 per capita in Europe and the US.
However, while Dubai’s per capita income is at par with highly developed countries, income distribution seems rather different from what is common in an EU country with similar per capita GDP. Although international handbooks hold no information on the number of people below the property line or the distribution of wealth and purchasing power for the top and bottom 10% of the population, the available evidence shows the UAE as stratified into social layers of nationals and expatriates which are subdivided into disparate income groups.
Asians who make up the body of the blue-collar workforce — and a significant share of the overall population — live and shop in subculture zones that are a half-world apart from the ritzy projects such as the new downtown and Dubailand. Given their commitment to send remittances home and the UAE’s high increase rates for rents and basic cost of living, it seems more than doubtful that the low to middle expatriate income groups will submit their hard-earned dirhams to the high spending habits required to make the new super-malls reach their sales targets.
Mega-malls with their oversized investments, high-priced special attractions, and arrays of 600 to 1,200 and more posh retail outlets per mall will create social challenges for the people of the UAE. The Dubai Chambers of Commerce have recently voiced first concerns that the emirate’s retail development is at risk of imbalances, by warning that the retail market is becoming “elitist.”
The from a retail perspective upside and un-scaled forward potential of the Emirates’ huge retail space investments lies in the regional and international visitor streams that the UAE want to tap into. By the projections in the Colliers International report, by 2010 non-residents would offload enough cash in local malls to reduce the required retail spend per resident by one-third, to about $5,500, some $200 below the current annual average amount.
“Build it and they will come”
Although the predicted increase in Dubai’s GLA to 2.35 square meters per capita in 2010 is more than doubling the GLA supply at the end of 2006, this is not the end of the planned expansions. The mother of all shopping miles in the Bawadi development will come onstream in the century’s second decade; so will the second phase of the Mall of Arabia and a number of other huge retail projects in Dubai. But the fact that these mega-investments will balloon the GLA of local retail even further is more than a play after the motto “build it and they will come” with the added twist “and make it the biggest ever.”
Tourism, by the course of state planning and investments which Dubai has chosen from constructing Burj Dubai to buying the QE2 as floating hotel, will have to supply the indispensable lifeblood of the emirate for decades.
The Bawadi retail boulevard in Dubailand is the logical expression of the aim to fill the world’s largest hotel and 50 others (all to be built in Bawadi) with paying customers by offering them the largest and newest man-made leisure space on earth as an integrated entertainment-and-shopping destination right outside the hotel doors. The plan spans the century, with completion of Dubailand scheduled by 2025. Until then, Dubai is betting on building a whole new class of purchasing-based attractiveness, where shopping becomes the thrill.
It is said that 100 years ago, Dubai — with its two districts of Deira and Bur Dubai — totaled about 400 small shops and 4000 date palms.
