By Soren Billing www.arabianbusiness.com
One of the largest retailers in the Dubai Metro has pulled out of the project despite losing a AED500,000 deposit, citing uncertainty over when the metro’s stations would open.
Convenience store Last Minute decided to forfeit its deposit and withdraw from the project weeks before the opening after claiming the Roads and Transport Authority (RTA) refused to provide any written guarantees on when the stations would open.
And rival retailer 24 Seven said it had pulled out of a bid for 20 outlets in July.
Last Minute’s operations manager Bhagwan Bas told Arabian Business that the RTA would give the company a rent free period of three months, but required the rest of the two year contract’s rent to be paid in advance.
“They had given me a three month period when I didn’t have to pay rent. That’s it. All of the two years’ cheques we had to pay,” said Bas.
Last Minute had won the bidding for 28 of the metro’s 52 convenience store contracts.
He said the RTA had promised to hand over the stores in at least eight stations by the September 9 opening, but refused to enter any written agreement on when all stations would be open.
An RTA spokesperson was not available for comment.
Retail rents in Dubai are believed to have fallen significantly since around 500 retailers submitted their bids to the RTA at the beginning of this year.
The RTA has said the average bid was three times higher than the minimum bidding rate.
Rival retailer 24 Seven said it had abandoned a bid for 20 outlets in July after the RTA postponed a final decision on the tenders and rents in Dubai had begun to fall.
“We do believe that the Dubai Metro will be a success in the long term, however given the timing of the project and the ensuing market conditions we couldn’t put our expansion plans on hold any longer,” said managing director Fahmi Al Shawa.
“Rents in Dubai have become competitive during the past six months, presenting us with an opportunity to grow our business rapidly, which made us re-shift our focus from the Metro to opening multiple new stores across Dubai.”
In addition, a recently announced ban on food and drink on the metro will make it difficult for convenience stores and coffee shops to target customers that are about to board the trains.
A spokesperson for regional retail giant MH Alshaya told Arabian Business that the company is on track to open six Starbucks outlets in the Dubai Metro.
The retail arm of EPPCO is believed to have taken over some of Last Minute’s metro stores but was not available for comment on Thursday afternoon.