Encouraging outlook for Middle East retail property market in 2011
The retail real estate outlook for Egypt, Saudi Arabia and Kuwait is looking encouraging going into 2011, according to a new analysis.
Egypt has a massive under supply situation, says Matthew Jay, senior retail analyst at CB Richard Ellis Middle East. He points out that Cairo has around 400,000 square meters of gross lettable area (GLA), which reflects ‘massive under supply relative to the market’s potential and has spawned a major building programme’
Until the addition of new retail space, rents are expected to hold up as vacancies remain minimal while filling the vacuum, hypermarkets have become major retail development drivers.
Under supply of retail has prompted a spate of developments, notably Cairo Festival City being developed by Al-Futtaim, which is now under construction and on target to open in January 2012. It is modelled in part on Dubai Festival City complex, also by Al-Futtaim.
Leasing of the stores began in the late autumn and the 140,000 square meter, three level shopping centre will host 250 international and regional retail brands, as well as a hypermarket, a multiplex cinemas, and food and beverage outlets. IKEA, Marks & Spencer and Carrefour are secured as anchors.
Majid AlFuttaim Group is likely to invite bids for its 160,000 square meter Mall of Egypt project, one of the largest shopping centres in North Africa, in November. Plans include an indoor skiing facility by Ski Egypt similar to the one in Mall of the Emirates, plus 350 stores, a 17 screen cinema complex and an outdoor plaza and dining.
The Kingdom of Saudi Arabia KSA is now attracting 43% of all international retail brands surveyed and has overtaken better known retail destinations like Hong Kong, Russia and Japan but a lack of high quality retail space has deterred some international brands from entering Saudi Arabia KSA.
‘The retail market is characterised by a strong presence from major retailers including local players such as Al-Aziza Panda and Al Othaim, regional operators such as Al Bandar Trading and MH Alshaya, and international companies such as Carrefour, Géant, Debenhams and IKEA, which mainly operate through regional or local franchisees,’ explained Jay.
However, the opening of several new, Dubai style shopping malls, such as Jeddah’s Mall of Arabia, should present more opportunities. UK retailer Alliance Boots opened there through MH Alshaya in March and retailers such as Hennes & Mauritz (H&M), Debenhams, Foot Locker, Mothercare, Starbucks and Topshop are all present in the market.
Although Kuwait already had a number of shopping centers, the opening last year of two high profile projects, Tamdeen Shopping Centers’ 360° Kuwait, anchored by Kuwait’s first Geant hypermarket, and The Avenues Mall, enabled a number of international brands to enter the market for the first time.
Jay said that retailers have undoubtedly been hit by last year’s downturn but retail sales are improving. ‘However, retailers continue to push landlords for concessions including long rent free periods, break clauses, help with fit outs and turnover rents or low base and turnover rents. The prime malls can afford to be tougher in their negotiations and lease lengths have remained at three to five years,’ he added.
In 2011, UK fashion department store Harvey Nichols will open as anchor to the third and final phase of The Avenues Mall through a franchise deal with MH Alshaya.