While still there, although less in Abu Dhabi than Dubai, the traditional, open-air souq is quickly being overshadowed by the modern, air-conditioned mall in the political and financial capitals of the UAE. Dubai dedicates more space to its souqs but it also far surpasses its much larger neighbor in space dedicated to climate-controlled commerce. And both are furiously building more malls.
At the end of 2006, the land covered by existing shopping malls in Dubai alone gave the UAE more space dedicated to shopping than any other GCC country will have until 2010, based on announced plans at the time.
In May, Dubai announced what is being described as the “world’s largest shopping area” — 3.7 million square kilometers of leasable retail space, or gross leasable area (GLA) in industry lingo.
The move added a retail component to the Bawadi development launched last year within Dubailand — the emirate’s 278 million square kilometer entertainment development. Malls, boutiques and street-level shops will line each side of the 10-kilometer Bawadi Boulevard, woven between and through 51 hotels, which themselves will have retail space.
This deluge of retail space — the equivalent of over 544 World Cup regulation football pitches, which if laid out lengthwise in a line would stretch over 57 kilometers and take the average person over 11 hours to walk end to end — is over two-and-a-half times the GLA in Dubai at the end of 2006.
Less than a month after the retail plan was announced, Al Ghurair Investments, a holding company based in the UAE, inked a joint venture with Bawadi to build the first of the malls. Phase one of the AED10 billion ($2.74 billion) project is expected to reach completion by 2012, explains Arif Mubarak, chief executive officer of Bawadi LLC, the project’s coordinator. The Ghurair Group, founded by Al Ghurair’s Investments’ CEO’s father, opened the first mall in Dubai in 1983.
Mubarak declined to speculate on the total investment the Bawadi shopping space would draw but does not expect the building to be completed before 2015. The Bawadi hotel development, announced in 2006, is expected to be finished by 2016 and cost AED 367 billion ($100.55 billion).
Elsewhere in Dubailand, what will be the world’s largest mall has its pilings and infrastructure in place, according to an official with the mall’s owner. She said that they hope building of the structure will begin in a couple of months.
Outdoing the world and each other
Myra Searle, vice president for retail with the I & M Galadari Group LLC, which owns the Mall of Arabia, explained the first phase of the mall will take 29 months to complete and have 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 mall’s total cost is AED32 billion ($8.8 billion).
The Mall of Arabia will not only replace the current largest mall in the world, in China, but it will also depose Dubai’s current largest mall, Mall of the Emirates, often known as “the one with the ski slope.” The Mall of the Emirates built an indoor winter oasis with the centerpiece five-slope indoor skiing area.
Abu Dhabi is not attempting to defy nature with its retail outlets, and the space dedicated to the malls in largest of the emirates, which comprises 81% of the country’s total area, pales in comparison to Dubai. Between 2006 and 2010, the GLA in Abu Dhabi is expected to more than double from 574,000 square meters to 1.4 million square meters. This will leave the oil and gas rich sheikhdom with 0.87 square meters of GLA per capita, 37% less than what Dubai is expected to have by 2010.
As Abu Dhabi follows Dubai’s lead in mall building, it is also mimicking its neighbor’s self-contained development building model. Dubai is known for the many “cities” within it (Knowledge City, Media City, Sports City, etc.), which feature housing, office, entertainment and, of course, retail space.
One of Abu Dhabi’s largest development projects, Al Reem Island, being built on a natural island, will also host what will become one of Abu Dhabi’s largest malls. Less than a third the size of the future world’s largest mall, the Al Reem Island Mall is expected to offer 130,000 square meters of GLA upon completion in 2010.
The Al Raha Beach development, which is planned to span a length of the Dubai-Abu Dhabi highway and, again, Dubai-style, be built on reclaimed land, will also house a shopping mall, albeit much smaller. The Al Raha Beach Mall will only offer shoppers 40,000 square meters of GLA.
The ultimate goal of all this mall building is to draw tourists, but malls are also a hit with the local market. Residents of the UAE are serious shoppers. A 2005 Nielsen Company poll found 80% hit the mall once a week or more “for something to do” — or “shopertainment”. This is the second highest rate in the world behind Hong Kong.
“The trend is more or less the same [today],” Himanshu Vashishtha, managing director at The Nielsen Company UAE, 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.” Why?
Little else to do but shop
“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.” With food courts, cinemas and other attractions, malls have become the place to go in the UAE. On average, residents spend three to four hours at the mall each trip. He noted the rates were higher among UAE nationals than the community of foreign nationals increasingly populating the country.
On average, Vashishtha said, those flocking to the mall spend AED400 ($110) per trip, or just under AED21,000 ($5,800) each per year. Right before the announcement of this new retail space, the real estate consulting firm Collier’s International estimated Dubai residents would need to spend AED31,000 ($8,490) per capita for all the malls to turn a profit.
The local burden, they estimated, would be reduced to around AED21,000 ($5,800) when tourist spending is considered, equal to what the entire country currently spends per capita each year. In Abu Dhabi, Colliers estimates residents will have to each spend AED18,000 ($4,932) to keep their malls in the black. Colliers did not estimate what amount tourists spend in Abu Dhabi malls.
So is all this mall building a viable plan?
“That’s the million-dollar question,” says Searle, of the Mall of Arabia. “Put it this way: A developer will know when Dubai is over-malled when the retailers no longer lease… At the moment we have seen no evidence of that taking place.”
