Nikoliers: In 2024, the supply in the Dubai retail market increased by 167,200 sq m.
Dubai’s retail space supply will grow by 1.8 million sq ft (167,200 sq m) in 2024, according to international consultancy firm Nikoliers. The Emirate expects three shopping and leisure centres to open. However, the shortage of high-quality space in popular locations is fueling further growth in rental rates.
Dubai. February 6, 2024. At the end of 2023 the total retail space in Dubai came roughly to 60.79 million sq ft (5.6 million sq m), with only rentable space taken into account. Projects that were temporarily suspended during the pandemic, such as Al Khail Avenue, are in an active stage of construction and monetization.
It is expected that 1.8 million sq ft (167,200 sq m) of leasable retail space will be added to the Emirate’s total supply in 2024. This includes the opening of three shopping and leisure centres located in Dubai’s rapidly developing areas: Al Khail Avenue in Jumeirah Village Triangle (total area: 900,000 sq ft), Dubai Expo Mall in Expo City Dubai (385,000 sq ft) and Nad Al Sheba Mall in Nad Al Sheba (505,000 sq ft).
Amid the expansion of numerous international retailers, the Dubai market is crippled by a severe shortage of retail space in quality shopping centres. According to Nikoliers, 2,623 leases (new ones and renewals) were registered in the Emirate’s shopping centres for 2023. The figure went down by 27% year-on-year. The number of new leases fell by 2.5 times, while the number of renewals showed a 7% growth, which confirms the shortage of available supply.
Robust demand led to a natural increase in average rental rates. Overall, rents in Dubai’s shopping centres increased by 20% in 2023 compared to 2022, to AED 333/sq ft/year (USD 976/sq m/year). During this period, rental rates for new leases increased by 44% and for renewed leases by 12%. Due to the scarcity of vacant space in shopping centres, new leases account for only 28% of the total number of lease agreements.
Meanwhile, in Dubai’s most popular shopping centres, average rental rates on new leases have gone 71% up. The highest rents on new leases could be found in Mall of the Emirates, Dubai Mall and Dubai Marina Mall. The high rental rate in Mall of the Emirates (AED 1,736/sq ft/year or USD 5,088/sq m/year) is due to low vacancy and rare tenant turnover, with only 3 new lease transactions registered in 2023, but 258 transactions in Dubai Mall. Average rents on new leases in retail spaces[1] also increased year-on-year, with La Mer (20%), Downtown Dubai and Dubai Marina (up 10.6% each) recording the largest increases. Like in the previous year, new leases accounted for more than half of all agreements in retail (57.4%).
Weighted average rents on new leases in the most popular shopping centres of Dubai in 2023
Amid high demand and limited amount of new retail space commissioning, historically popular shopping centres (such as Wafi Mall and Dubai Outlet Mall) announced expansions and renovations. In the meantime, malls that opened during the pandemic (Cityland Mall, Silicon Central Mall) are now being successfully relaunched. Dubai Festival City Mall is preparing for radical upgrading, which will involve facade renovation and tenant mix renewal. Such projects can be a great solution for new brands just entering the Dubai market, as vacancy rates are extremely low in the top-tier malls, and property owners more often than not favor powerful and offbeat concepts or well-known global brands.
“Retailers are still interested in premises within the Emirate’s best locations. To get there, they are working hard on product concept and quality, uniqueness, their brand awareness, promotion, marketing. Brands that have entered the market, quite quickly begin to expand their catchment basins in Dubai, primarily entering the areas with high footfall and traffic,” comments Andrey Kosarev, Partner at Nikoliers. “That said, the scarce supply of high-quality space in popular locations remains one of the main challenges. We expect that this factor will continue to push up rental rates even further and make the owners of large and most attractive shopping centres even more selective.”
[1] Bustling shopping areas located in popular tourist destinations, owned and managed by a single developer or investor – a unique tenant mix is formed in such areas, similar to shopping centres and a special marketing strategy is developed.