Come September, the ancient pyramids of Giza will be getting a new neighbor: the country’s largest shopping center, Mall of Egypt.
This story first appeared in the August 3, 2016 issue of WWD. Subscribe Today.
The 1.8 million-square-foot megamall, a $686 million investment, will have more than 350 shops; an indoor ski slope and snow park; a state-of-the-art, 21-screen VOX Cinemas complex; a family entertainment center called Magic Planet, and indoor and outdoor restaurants and cafés. It’s the same type of all-encompassing, “city-within-a-mall” model Dubai-based developer Majid Al Futtaim created in Dubai with Mall of the Emirates, which promises to be a game-changer for the traditional souk and high-street style of retailing in the country.
Megamalls are common in the Gulf states, especially the United Arab Emirates, but projects of this scale have not been seen in Egypt, which, after the mall’s opening, will be home to Africa’s only man-made snow park. “There is a forward mind-set that drives a lot of the futuristic thinking on how great moments can be created for our audience,” said Robert Welanetz, chief executive officer of Majid Al Futtaim Properties. “We don’t have handcuffs on aspiration, therefore really interesting projects get delivered. Here you find an interesting confluence of offerings within enclosed mall settings, from leisure and entertainment to basic needs.”
Developers are banking on the long-term economic prospects in Egypt to drive the move of Dubai-style megamall retailing into other parts of the Middle East. “When we enter markets, we are looking at ones that are scalable in size and population,” said Welanetz. “Egypt stacks up very well. If you consider its population is 90 million-plus and retail spending will increase 90 percent, it all sets up well for retailing. It’s a market of prime opportunity and not overdelivered.”
By 2018, more than 72 percent of households in Egypt are expected to be in the middle-income bracket, which represents the key demographic for increased future household spending. The rapidly growing population is forecast to drive a robust increase in spending over the coming five years, averaging gains of 6.3 percent annually between 2016 and 2020.
According to Jorge Lizan of Lizan Retail Advisors, who works with clients looking at entering markets like the Middle East, “There is a rising middle class in Egypt that is very aspirational. They know international brands. They go to Dubai and Europe, and they want to have the brands in their home country.”
Despite Egypt’s vast potential, there are speed bumps looming in its path. There has been a protracted slump in the tourism sector, as well as high unemployment and inflation. According to the Egyptian Ministry of Tourism, total tourist traffic fell by one million last year. Tourism spend amounted to just $500 million, down from $1.5 billion during the same period last year. Inflation is fluctuating between 9 and 11 percent, which will suppress purchasing power.
But still, the Mall of Egypt is expected to bring in a rush of international retailers with longer time horizons. “What we have been experiencing is the retailers and international brands are following developers,” said Lizan. “[Al Futtaim] is developing the mall, and all the retail platforms from the region, like Alshaya and Alhokair, are supporting them. International brands will go together. Brands don’t make the decision to go specifically into only Egypt…but are part of larger retail platforms across the region.”
Mall of Egypt is not the country’s first large-scale mall, but it is the biggest to date. City Stars, Cairo Festival City and Mall of Arabia are considered top-tier, “grade-A” malls. According to Colliers International, the average rental rates across Cairo’s shopping malls range between $625 a square meter and $1,190 a square meter. Grade-A shopping malls are said to be operating close to full occupancy.
The retail market is considered undersupplied by approximately 14 million square feet and an additional supply of 6.5 million square feet is expected to come online over the next five years. The market is still expected to be undersupplied by 10.8 million square feet in 2020. With consumers between the ages of 20 and 39 years old representing 47 percent of the population, the demand for new brands coming into the market and for prime retail spaces should remain high.