In its annual survey, real estate analysts CB Richard Ellis mapped the global footprint of 323 of the world’s leading retailers across 73 countries and found that 56% of brands are present in Dubai, matching London at the top of the list.
Michael Leighton, a retail analyst at CB Richard Ellis, said the reason that Dubai has been able to grow rapidly as a retail hub is because of its franchise model, which makes it possible for retailers to enter the market with local knowledge and minimal investment. “So it’s quite a low risk play for retailers with very high returns,” he said.
Dubai’s location and its focus on building world-class malls have also been driving forces in the emirate’s evolution as a leading retail presence. The recession also prompted more retailers to enter Dubai as they were forced to focus more on emerging markets and locations where consumer spending is still relatively high, he noted.
Of the six brands that entered Dubai last year, all were from the US, where retailers were particularly hard hit by the recession. Noting that 98% of operations in the UAE are franchised, compared to just 6% in the States, Leighton said it has taken a while for US retailers to get comfortable with the way of doing business in Dubai.
“The mentality of US retailers has always been to operate your own business, in your own country, and be in complete control. So it’s been an education process to get them comfortable,” he noted. Among the US retailers that have entered Dubai over the past year were Crate & Barrel, Pottery Barn, and Cheesecake Factory.
While acknowledging that Dubai may have reached a limit in terms of its capacity for new mega malls, Leighton says there is still an opportunity for new brands to be added as malls try to stay ahead of the competition.
“Yes, Dubai has probably reached a saturation point in terms of grade A shopping malls, but growth happens in different ways. For landlords, it’s about asset management and repositioning their malls, so you see a lot of them refreshing their tenant mix in an effort to keep their products ahead of the market.
So rather than just expanding, they have looked at their portfolio and their units and in some cases pulled out their lesser trading stores. So it is more of a consolidation exercise rather than expansion from a retailer’s perspective,” he said.
Thanks mainly to the tremendous growth of Dubai’s retail sector, the UAE is the second-biggest retail market in the world, just behind the UK, the survey noted. However, as Abu Dhabi emerges as a major retailing destination in its own right, it is very possible that the UAE could overtake the UK.
“I don’t see why the UAE couldn’t pass the UK in the coming years. Franchise operators are still very hungry to take on new brands, and brands are becoming much more interested in coming to the region. And Dubai is benefitting mostly because it is the first port of call and the hub for expansion across the region,” he said.
Wednesday, April 13- 2011 @ 15:30 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.