From the first Macy’s outside of the U.S. to revealing the world’s largest department store for handbags, beauty and kids, Abu Dhabi is seeing a surge in retail developments more akin to its glitzier neighbor, Dubai.
But retailers eager to find the right space are turning to what has been viewed as the sleepier capital of the United Arab Emirates as their point of entry to the lucrative Gulf region. Located an hour’s drive from Dubai, Abu Dhabi has overtaken Dubai as the Middle East’s most active city for mall development, according to the real estate consultancy CBRE. With nine large mall projects under construction, the oil-rich emirate will be getting 8.4 million square feet of new retail space. It ranks among the top-20 cities in the world in terms of new retail space.
Matthew Green, head of research at CBRE Middle East, explained that while Dubai may still be the preferred port of entry for brands, availability of space is leading retailers to the capital as an alternative.
“There is no vacancy for large-scale stores to come up in Dubai. Dubai Mall and Mall of the Emirates have waiting lists. Abu Dhabi presents a new opportunity and a retail market that is underdeveloped,” said Green.
Like Dubai, Abu Dhabi’s retail boom is focused on creating lifestyle destination spaces.
“Any new mall that opens up here will always have a huge leisure component. It’s fundamental to success,” said Green. “It’s what gets people to come in and spend [more time] in a mall. You increase the dwell time and increase sales and everyone is happy.”
Last month, the Yas Mall on Yas Island opened to the public. Abu Dhabi’s largest shopping and entertainment destination, Yas Mall is spread across 2.5 million square feet and is attached to the Ferrari World Theme Park. Developed by Aldar Properties, the mall has more than 400 stores and 60 international restaurants. Among them will be Ikea; the largest Debenhams outside of the U.K.; Hamleys toy store; Cheesecake Factory; the region’s first Lego concept store, and Rogo’s Rollercoaster Restaurant.
The developers aim to attract 20 million visitors a year.
“The retail sector [in Abu Dhabi] has grown significantly, and now Abu Dhabi enjoys the largest retail-development pipeline across the GCC,” said Abubaker Seddiq Al Khoori, chairman of Aldar Properties.
The mall developers and retailers are hoping to capitalize on rising retail sales in the United Arab Emirates — up 5 percent to $66 billion in 2013, according to A.T. Kearney. But the big risk is whether the buyers will come to Abu Dhabi as they have flocked to Dubai. Abu Dhabi last year had 2.8 million visitors, while Dubai had 11 million. Traditionally, even shoppers who live in Abu Dhabi go to Dubai to shop. While most of the luxury brands do have outposts in Abu Dhabi, until now, there was no one destination where shoppers could stroll around in a luxurious space.
But the retailers believe Dubai and Abu Dhabi will no longer have such a clear differentiation. “The Emirates are going to increasingly come together,” said Patrick Chalhoub, cochief executive officer of the Chalhoub Group, which is set to open its department store at Yas Mall in November 2015. “We have to create a destination where people will want to stay all day. It will not matter where they are.”
The Tourism Development and Investment Co., the master developer of Abu Dhabi’s cultural projects such as the Louvre and Guggenheim outposts, is also looking at moving into retail. According to published reports, the developer is in the final rounds of securing funding for a large mall to be called The District. TDIC will partner with L Real Estate, a global property development and investment fund sponsored by LVMH Moët Hennessy Louis Vuitton, for the endeavor. Construction on the project, which will hold more than 550 units across nearly 3 million square feet of leasable space, is scheduled to be completed by 2017.
Construction has started on Abu Dhabi’s new superregional shopping mall, Al Maryah Central, which will be anchored by Macy’s and Bloomingdale’s. The 2.3 million-square-foot mall is scheduled to open in March 2018.