UAE consumer confidence hit by softening of retail sector

|By Arabian Post Staff|

Consumer confidence in the UAE remained uncertain in 2016 resulting in the Dubai retail market experiencing further softening in Q1 2017, according to a latest report by Knight Frank.

“Well-established malls with higher footfall continue to maintain healthy occupancy rates; however the delivery of additional retail supply is expected to put pressure on overall occupancy rates. UAE shopping malls are also expected to experience further competitive pressures from online rivals, as more consumers embrace e-shopping,” the report said.

Knight Frank’s long-term view remains optimistic as Dubai’s retail market is strongly supported by the hospitality sector. The delivery of Dubai’s new theme park complexes along with the Opera District and other demand generators is expected to drive demand for the hospitality market, which will undoubtedly have a knock-on effect on the retail market.

It observed a modest growth in sales. UAE retailers are now seeing modest single-digit growth in sales due to general macroeconomic conditions, while there are signs of saturation: an additional 900,000 square metres of space will be delivered over the next couple of years through new shopping centres or expansions.

“Traditional retailers are facing competition from e-commerce leaders such as Amazon. E-commerce sales are expected to account for US$ 1.5 billion of the Gulf’s high-end luxury segment within the next four years,” Knight Frank said. “Retail strategies: operators are more often offering promotions and price reductions to entice customers and maintain strong footfall to further enhance and build on the emirate’s strong position as a central shopping hub while the electronics market, supported by Dubai’s position as a regional hub for trade flows and re-exporter of devices in the region, is expected to grow 4.7 per cent to reach US$ 3 billion by 2020.”

“It is our view that brick & mortar stores will continue to be essential given shopping centres in Dubai provide family entertainment in addition to shopping, however retailers may look to realign their real estate strategies to reduce operating costs and to invest further into online channels.”