LONDON — A new retail era is unfolding in the Middle East, with spaces that encapsulate Western and homegrown ideas and strategies that are increasingly built around tourism, family entertainment and consumers’ demand for round-the-clock experiences.
No fewer than six mega-malls — where shopping is one of many activities on offer — are in the works in Oman, Riyadh and Qatar, while Moda Operandi and Yoox Net-a-porter Group are busy taking their retail concepts to the Gulf region.
According to CBRE, the Los Angeles-based commercial real estate services and investment giant, the United Arab Emirates are among the most popular target markets for retailers’ brick-and-mortar networks in 2017. The UAE ranked fourth behind the U.K., France and Germany.
The commercial real estate company Colliers International said the retail industry is one of the fastest-growing sectors within the Gulf Cooperation Council, the regional organization that includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, due to evolving consumer lifestyles and a growing number of tourists.
In its recent Retail Tourism report, Colliers lauded Dubai, home of the Dubai Mall and Mall of the Emirates, for setting high standards for all GCC cities.
“In countries where the temperature is high, these malls are seen as indoor leisure destinations and when they’re connected to a hotel, they’re seen as 24-hour destinations,” said Filippo Sona, director, head of hotels, Middle East and North Africa region for Colliers.
Sona, who lived in London for 16 years and watched Westfield London being built, said the reason for building malls in the Middle East is different from that in the West.
“In a developed economy, you build a mall to create jobs and drive the local economy. In the [Middle East], malls have to be destinations, and there needs to be a 24-hour element. Keep your audience in one place and they’ll spend more money in the mall.”
Sona said for every $1 spent at a hotel attached to a mall, $3.20 is spent at the mall itself.
Of the six mega-malls in the works in the UAE (the Mall of Qatar opened in December 2016), one was inspired directly by London’s Westfield. Al Araimi Boulevard mall, which is set to open in Muscat, Oman, next year, spans 1.6 million square feet and is aiming to capture both the domestic and tourist markets.
“My family loves London and we are regular visitors. Westfield in West London — with its destination mall, picturesque parks and attractive mixture of modern and historic buildings — is a favorite place. It’s this family-friendly destination that we have sought to re-create,” said Sheikh Fahad Abdullah Al Araimi, chief executive officer of Al Raid Group, which is investing 127 million pounds, or $164 million at current exchange, in the project.
“In Oman and some of the other Gulf states, while there are a lot of shopping malls, there is a lack of destination malls, places with food, leisure and cultural facilities when families can spend their leisure time rather than just shopping,” he said.
The “experiential retail” bug is spreading fast. As he laid out his strategy for the British department store chain Debenhams, which has branches throughout the UAE, the new ceo Sergio Bucher said capturing customer attention is more important now than ever because leisure activities are increasingly taking a big bite out of overall consumer spending.
Bucher said successful retail today is about “wrapping” merchandise in a set of experiences rather than just selling it.
Like Al Raid Group, Moda Operandi is taking an experiential concept and seeding it in the Middle Eastern market. The e-commerce site is planning to add to its small network of showrooms with a seaside town house space in Dubai.
The Moda by-invitation-only showrooms, which already exist in Manhattan and London, offer personalized shopping services, monogramming and made-to-measure and commissions as a way to bring off-line care to online VIP customers.
While fellow luxury e-tailer Yoox Net-a-porter Group isn’t building town houses or malls in the region, it inked an alliance late last year with Mohamed Alabbar, the man who developed and who manages the Dubai Mall. YNAP has a joint venture with Alabbar’s Symphony Investments that will run the partners’ online retail luxury businesses in the GCC region, and may expand to other Middle East countries and North Africa in the future.
There are plans for on-the-ground operations including a sales and marketing office, customer care and public relations teams, a distribution center in Dubai and the development of a localized offering for the Arabic-language customer.
“The Middle East is one of the fastest-growing global centers for luxury retail. The region also has a significant population of [more than] 200 million young people who are tech-savvy and influence luxury retail decisions,” said Alabbar late last year when the deal was unveiled.
Tourism is a big driver of retail development in the Middle East, with Dubai hitting the top of the charts in terms of tourist spend and Saudi Arabia working to build a “tourism pillar” as it seeks to become less dependent on oil.
According to Savills’ recent “12 Cities: Occupying and Investing in World City Real Estate” report, Dubai boasts the highest average spend per overnight visitor. Travelers spending the night in Dubai, which has been a major trading port since 1822, spend an average of $2,050, compared with $1,453 in New York and $994 in London.
Dubai also boasts the highest spend for retail and for food and beverage per overnight international visitor of any other region in the world, according to Savills.
According to Sona of Colliers, the Next Big Thing in UAE after the mega-mall will be the discount shopping outlet. “As people learn about malls as ‘destinations,’ we’re seeing the outlet mall concept or village becoming more popular,” he said, pointing to Bicester Village in Oxfordshire, England, as an example. “The outlet villages bring tourism, and you can already see land [for these projects] becoming very expensive.”
An early mover on the scene is the Dubai-based holding company and retail specialist Meraas, which owns The Outlet Village, a slick retail enclave with three department stores, family attractions, international dining and more than 100 brands such as Galeries Lafayette, DKNY and Giuseppe Zanotti. It is located in Jebel Ali, not far from Dubai and Abu Dhabi.
Deals, ideas — and money — are also flowing from the Middle East to Europe, and to the U.K. in particular.
London has always been a hot spot for Middle Eastern spending and the post-Brexit referendum weaker pound has only fueled those fires.
Since 2005, the Qatar Investment Authority and its related businesses have invested around 30 billion pounds, or $40 billion, in retail, such as Harrods; commercial property such as the hotels Claridges and the Connaught, and residential property. It also owns the site of the U.S. Embassy in Grosvenor Square, which will soon be converted into luxury flats when the embassy moves to south London.
Last summer Boutique 1, the Middle Eastern retailer with stores in Dubai, Abu Dhabi and Beirut, opened a 12,000-square-foot unit on Sloane Street in Chelsea. At the time of the opening, the U.K. market was already Boutique 1’s largest outside the UAE. Customers can access stock held worldwide, including merchandise from the monobrand stores that Boutique 1’s owner Ziad Matta operates. There is same-day delivery although customers have to wait 48 hours if their order is being shipped from Dubai.