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Megamalls and More in Dubai

More than 22 million square feet of retail space is set to launch as part of a one-stop entertainment concept.

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WWD ICSC Preview issue 05/05/2008

More than 22 million square feet of retail space is set to launch as part of a one-stop entertainment concept.

DUBAI — Dubai is fast becoming an architectural fashion statement, and it’s not only the tallest building in the world or the 7-star sailboat-style hotel that make this desert kingdom stand out.

Dubai has cemented its place as the region’s retail tourism destination. More than 22 million square feet of new retail space is predicted to enter the market in the next year. A city that has been an oasis of political stability in the region has become an oasis for the region’s wealthy to spend their money.

And spend they do, in gargantuan malls that are complete family entertainment resorts.

Majid Saif Al Ghurair, chairman of the Middle East Council of Shopping Centers, said one of Dubai’s great strengths has been in mall design.

“We are innovative in terms of concepts and architecture,” he explained. “We build interesting buildings that people want to see and experience.”

The newest mall, which has the retail world abuzz, is the Dubai Mall, set to open Aug. 28. At 12.1 million square feet, it is expected to be the largest in the world. The mall will feature an Olympic-size ice-skating rink, one of the world’s largest aquariums and an adjoining Armani Hotel. Galeries Lafayette will be one of the anchors, marking the first time the iconic department store moves outside the realm of the European Union.

But that’s not all. The Mall of Arabia, to be completed next year, will have 10 million square feet of space and will house more than 1,000 stores, a bowling alley, a health spa and a dinosaur-themed park. It also will be home to the world’s biggest Starbucks.

The number of new malls in development is mind-boggling for a city still relatively small on a global scale.

“We don’t have high indigenous population numbers,” said Saif Al Ghurair. “But we are surrounded by countries of large populations that come through here. I don’t consider people who come here from India or Russia on the weekends as tourists. For many, this is another home. People who come from Saudi Arabia and other [Gulf Cooperation Council] countries have an excess amount of money they can spend here.”

With the world’s great economies weakened and retail spending tight, the big question is whether Dubai’s large retail projects can succeed. Some argue that Dubai’s geographical location is ideal and will always make it a crossroads for business.

Saif Al Ghurair explained that Dubai has traditionally been a multicultural trading hub for merchants and traders. “Historically we have attracted a mix of people from East Africa, the Indian subcontinent, Iran, even China and the Far East. So this connectivity is a major factor for our success.”

In addition, “people find the conditions suitable to do business here,” he said. “Markets like India have huge potential, but the infrastructure may not be as good, so retailers have been more comfortable coming here.”

However, he acknowledges there are challenges, saying, “Inflation is very high.” Saif Al Ghurair, himself the owner and operator of the Burjuman Mall, which has one of the highest concentrations of luxury outlets, said that high prices do not seem to be affecting mall traffic.

Dubai has an estimated 140.5 million visitors to its malls annually. Retailers are confident about the sustainability of the sector.

“These visitors are bound to increase with the introduction of…residential properties and the popularity of Dubai as a tourist destination,” said Saeed Al Falasi, vice president of Business Development and Operations for the BinHendi Group, one of the largest retailers in the region. “The economic growth of the country has made it a favorite destination to work and live in. The spending power of those who settle in UAE is great and is further igniting the growth of the retail market.”

The BinHendi Group will open 17 different retail outlets at the Dubai Mall alone, ranging from luxury apparel to jewelry and food and beverage.

Recently, the BinHendi Group gave one of Dubai’s oldest malls a luxurious uplift with the introduction of BinHendi Avenue. Designed by Terry Dougall, the architect behind the design of The Forum Shops at Caesars Palace in Las Vegas, the avenue is intended to provide an old-fashioned, English-arcade-style shopping experience. It houses a host of BinHendi fashion brands, including Hugo Boss, GF Ferré, Zilli, Brioni, Paul & Shark, Artioli and Baldessarini. Other brands on the avenue include G-Star Raw, Phat Farm, Ungaro Fever and Byblos Blu.

It seems as though there might be too much repetition in the market with so many malls offering the same mix of products. But Al Falasi doesn’t think the redundancy is bad for the market. “The competitiveness of a retail market is a healthy indicator of its maturity and established returns. Dubai is such a market where many of the wealthy and elites consider it a shopping destination.”

Also Saif Al Ghurair points out that an increasing number of U.S. brands are coming to the Middle East.

“We’ve proven that those that came early really benefited in sales, so now more and more American brands are reaching out further,” he said.

Banana Republic and Gap both launched major marketing campaigns in the last month, taking billboards across the city. Even Nicky Hilton has chosen the new Dubai Festival City Mall as the location for her first flagship for her brand, Nicholai.

John Davis, chief executive officer of real estate consultancy Colliers International, agrees. “Retailers are bullish about Dubai’s prospects,” he said. “Major brands continue to migrate to the region,”

But, he pointed out, “2010 will be a watershed year. The strong will survive, weak will disappear.” Malls, he added, will have to learn how to reposition their products, and “may not be able to depend on tourism to fill space.”

Creating family-friendly destinations seems to be Dubai’s secret to success and one way to stave off repetition in malls.

“It just works in this environment,” said Melissa Endear, of Manchester, England, who has lived in Dubai for three years. “It’s so unbearably hot for so many months of the year and it’s just easier to go to one stop where I can eat, shop and keep my kids entertained. Anywhere else in the world I wouldn’t dream of spending so much time in a shopping mall.”

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