Etihad Towers - podium.
Abu Dhabi retail space in big demand
Abu Dhabi, April 29, 2012
The retail real estate market in Abu Dhabi remained steady during the first quarter of 2012 with good demand as there were no significant deliveries during the period, according to a report.
The sector experienced the least amount of change in terms of supply and performance during 2011, however the trend was likely to change in the coming months in line with expected retail completions, said leading property expert Jones Lang LaSalle (JLL) commenting on the UAE capital's retail sector.
JLL said the sector remained steady in terms of both supply and performance in Q1 but an estimated 271,800 sq m of retail gross leasable area (GLA) could be delivered to the market by the end of 2012.
Given the spending power of the population and additional growth from increasing tourism, there remains significant latent demand for retail in the Abu Dhabi market, most of which is currently serviced by Dubai.
The delivery of upcoming projects will help address some of this latent demand, it added.
In addition to new major malls, a number of other retail projects (including retail offerings within mixed-use projects and community retail) are expected to enter the market, adding more high quality retail space, said JLL in its report.
These include Boutik at the Sun and Sky Tower on Reem, the retail podium at Etihad Towers, the retail mall at Nation Towers, and The Galleria on Sowwah Square.
Major retail centres scheduled for delivery include Deerfield’s Townsquare in Bahia, Emporium Mall at Central Market and Capital Mall in 9712/ Building Materials City.
Paragon Bay Mall on Reem Island and Danet Mall could also be delivered in 2012 as construction is almost complete however opening dates remain uncertain, the report said.
The real estate specialist pointed out that the retail stock in Q1 remained steady at 1.6 million sq m owing to lack of significant retail deliveries.
There have been major delays in the scheduled openings of retail centres but an additional 271,800 sq m of retail GLA could enter the market during 2012.
According to JLL, Abu Dhabi currently lacks in terms of good quality retail space as majority of the existing supply have shortfalls such as poor layout, lack of parking or poor accessibility.
However, the upcoming retail supply is expected to change the retail dynamics in the emirate, improving the quality and retail mix. Yas Mall, the biggest retail development currently under construction on Yas Island, is expected to be completed by late 2013.
The proportion of high-end retail was set to rise further with the launch of luxury stores in Etihad retail podium, The Galleria on Sowwah Square and Nation Towers, it stated.
Due to the large supply in the pipeline, retail centres had started to make an effort to reposition their malls in order to become more attractive to both tenants and retailers.
JLL pointed out that non-mall space currently dominates the Abu Dhabi retail market, accounting for approximately 50 per cent of total supply.
The super regional and regional malls currently account for 38 per cent of total space and lead the market in terms of performance.
Upcoming retail supply will increase the proportion of mall space in Abu Dhabi as multiple community and regional malls are delivered, it added.
JLL said despite revisions to previous projected supply figures, the total retail stock could reach 2.1 million sq m by the end of 2014.
Limited supply of good quality retail space on Abu Dhabi Island had caused demand to remain strong, resulting in asking rents for regional and super regional malls on Abu Dhabi Island to remain steady.
According to JLL, the average asking rents for line stores on Abu Dhabi Island remained unchanged at Dh2,750 per sq m per annum.
As competition for tenants increases, some malls outside Abu Dhabi Island are choosing to offer lease incentives including rent free periods and an increasing proportion of turnover rents, the report pointed out.
With many new retail centres scheduled to enter the market before 2014, rents are expected to remain stable in the short term but soften in the medium term as landlords compete for retailers.
Rental performance, said JLL, is most likely to separate out for high quality versus low quality space placing pressure on rents in poor quality malls.
Vacancy rates remain very low in retail centres on Abu Dhabi Island with malls experiencing vacancy rates of as low as 2 per cent. Vacancy rates are expected to remain low but increase slightly in line with new supply, the report stated.
According to JLL, the proportion of high quality retail was increasing as a percentage of total GLA with the supply to hit 2.1 million sq m by the end of 2014.
There are a significant number of retail projects expected to open by the end of 2014 although some could be delayed based on recent trends, it added.-TradeArabia News Service