Meanwhile, rentals in the secondary malls are flat
Dubai: Rental rates in Dubai’s prime malls were up between five and six per cent in the second quarter of the year as retail space grows in the city, according to property analysts.
In the last 12 to 15 months, “rents in prime malls have increased by 10 per cent,” said Mat Green, head of research for the UAE at CBRE.
There are a number of new projects entering the market this year and the next; the largest of these are Al Ghurair Centre in Deira and The Avenue on Al Wasl Road. A total of 48,000 sq. metres of mall-based stock is expected to be delivered this year, and 144,000 sq. metres next year, according to data by Jones Lang LaSalle (JLL).
Occupancy rates in prime malls are high, with some registering between 90 and 100 per cent occupancy, says Green. This leaves little available supply, which puts retail rents at a premium, he said.
The addition of the new supply “won’t stop rents from going up in super prime malls,” said Craig Plumb, head of research for the Middle East and North Africa (Mena) at JLL.
Retail rents for super prime malls stood at Dh4,980 per sq. metre in the second quarter of this year, up from Dh4,700 per sq. metre in the last quarter of 2012, Plumb said.
Meanwhile, according to a new CBRE report, Dubai’s average retail rents for prime locations stood at $114 per sq. feet per annum as of the second quarter of this year, while in Abu Dhabi it amounted to $71 per sq. feet per annum.
Over in Dubai’s secondary malls, such as Ibn Battuta Mall and Al Ghurair Centre, retail rental rates are flat, property consultants said.
Rents over there have dropped by 7.5 per cent in the second quarter of this year to Dh1,722 per sq. metre, from Dh 1,862 per sq. metre in the last quarter of the previous year, according to Plumb.
Competition in the market has kept rental rates flat, he said, adding that “vacancies are likely to rise in secondary malls.”
However, Green said that although rates dropped previously, they are now improving as occupancy increases. Still, rents remain flat.
In the past five years, high-end brands have been leaving secondary malls and going to more prime locations.
“As more destination malls are delivered, retailers go to where there is high potential of sales and footfall,” Green said.
Secondary malls, meanwhile, have attracted local brands and start-up businesses that serve residents in the area in an effort to re-position themselves, he said.
There has been a relatively small increase in stock of mall-based retail space since late 2010, given the overall size of the Dubai market, according to Plumb.
“There is very little new retail supply in the last two to three years,” he said.
Total stock of mall-based retail space stands at 2,816,000 per sq. metre this year, from 2,648,000 per sq. metre in late 2010- which is an increase of 168,000 per sq. metre over the last three years.
If planned retail projects for the future are delivered, “there would be excess supply, but in reality, some will be delayed,” Plumb said.
By 2016 and 2017, an increase of supply will result in tapered rents, according to Green.
Over the next year, he expects “a steady improvement in rents.”