Mall rents inch their way back to pre-2009 levels

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By Manoj Nair, Associate Editor  www.gulfnews.com

Dubai: The best thing that could happen to a retailer with outlets in Dubai’s leading malls is that they don’t come up for renewal now. If they do, expect to shell out more in rent.

Image Credit: Arshad Ali/Gulf News Archive Shoppers at Deira City Centre. Market sources feel there has been a partial firming up of retail rentals in Dubai over the last two quarters.
Image Credit: Arshad Ali/Gulf News Archive Shoppers at Deira City Centre. Market sources feel there has been a partial firming up of retail rentals in Dubai over the last two quarters.

If the renewals are not due anytime soon, at least the retailers will have breathing space before they confront an increase in rents. Dubai’s retail leases, at least in its major malls, are inching their way back to their pre-2009 level.

The malls on their part are leveraging what was an exceptional showing by the retail sector last year, helped by increased tourist arrivals and more domestic shoppers indulging in discretionary spending.

“As a general rule, higher sales equate to higher rental levels in the most successful retail environments,” said David Macadam, regional director and head of retail at Jones Lang LaSalle Mena. “So, yes, it is very likely that new leases and renewals will see an incremental firming up of the lease rates in the leading malls in Dubai.

“Several of the most successful retail trading environments may be recording a firming up of rates on renewals and new leases.”

While uniformly in agreement that they are benefiting from rising sales, retailers say it is still too early in the recovery phase for mall owners to push for higher rates.

To buttress their point, they say that a strong showing in December and January was offset by a slower run in February and this month.

“Two strong months on their own do not suggest a sustainable recovery is there — the retail sector requires more time to determine this is so,” said the head of franchise operations at a leading business house.

But Macadam begs to differ on the point: “Retail sales over the past 12 months have been generally quite strong in Dubai overall. The largest number of tourists recently has been originating from the Far East and the Subcontinent. More info