Challenging times for UAE retailers, but Dubai well positioned
Challenging times for UAE retailers, but Dubai well positioned
The crash in oil prices has had a trickle-down impact on the Gulf state’s retail markets, hitting consumer confidence, consultancy group Euromonitor International said — although others see signs of hope on the horizon.
Faisal Durrani, a senior partner at Cluttons real estate consultancy, said there are uncertainties ahead flowing from “the introduction of VAT, rising interest rates and inflation which is nudging up.”
But Dubai, with its more diversified economy, is in a much better place than Abu Dhabi, Durrani emphasized, with the latter more dependant on economic growth from hydrocarbons.
“About half the Abu Dhabi economy has relied on the hydrocarbon sector for growth which means we’ve seen oil and gas companies returning office space to the market,” Durrani told Arab News.
“In retail, if you are seeing a decrease in rate of job creation at the top end, that trickles through to retail.”
Footfall and occupancy rates in prime retail space in Dubai have showed no sign of weakening, said Durrani. Prime space occupancy is at about 100 percent, he added.
However, at secondary or tertiary retail properties, there have been signs of softness, according to property consultancy JLL.
Even larger malls in the emirate had recorded declines of between 3-5 percent in headline rents on a quarterly basis, according to JLL’s Dubai Real Estate Market Overview that covered the third quarter of 2017.
Rents are expected to remain under pressure over the next 12 months given the large volume of potential new supply due to enter the market, said JLL.
Regional gross domestic product (GDP) levels have tumbled since the oil price rout of 2014 — and this is bound to produce losers. Among those feeling the heat is Dubai retailer Marka which recently posted deepening losses for 2017 with income down 68 percent. The company has failed to turn a profit since listing on the Dubai stock exchange in 2014. It said in October it had “taken steps to sell or close the vast majority of fashion and sport brands whilst also undertaking a significant reduction in overhead costs.”
Marka expanded rapidly into the retail, food and beverage segments, but has built up indebtedness as well as being by hit by falling consumer disposable income since the collapse of the oil price.
Majid Al Futtaim Group (MAF), the company behind Ski Dubai and operator of 22 shopping malls across the Arab world, saw earnings growth slow according to a statement from the company on Jan. 31.
Earnings before interest, tax, depreciation and amortization (Ebitda) were up just 1 percent to AED 4.2 billion. But the outlook for 2018 was said to be bright.
Alain Bejjani, the chief executive, said: “Majid Al Futtaim’s diverse businesses and the markets in which we operate are experiencing rapid change and new innovations. At the same time, our region continues to face volatility, our competition is becoming global and the needs of our customers continue to evolve.”
He added that the company wanted to become as prominent digitally as it was physically, in order “to drive our resilience and competitiveness.”
Majid Al Futtaim’s slow Ebitda growth predominantly resulted from a change in business mix across the portfolio, with food grocery retail growing at a faster rate than the higher margin properties businesses, according to the company.
Certainly, MAF is not in the doldrums; it is making good profits, as is Emaar Malls.
Fears that there could be an oversupply of prime retail and hospitality in Dubai were dismissed by Durrani. “In Dubai, there are rising tourist numbers as it is now much easier for visitors from China, India and Russia to get visas. And there is Expo 2020 coming up,” he said.
More generally, for the region as a whole, Durrani said that “perhaps credit card spending and larger purchases would be stalled and local investments may look more attractive than overseas ones (because of the weak dollar). On the other hand, with growth expected to pick up in the Gulf this year, that could lead to more job security — and perhaps higher pay rewards.”
But a Euromonitor International report on the UAE retail sector, published this month, said: “In line with most retailers’ expectations, 2017 continued to be impacted by lower oil prices, regional and global macroeconomic factors impacting consumer confidence and expenditure patterns. Whilst many retailers report that growth tends to pick up during the last quarter of the year, mid-year months such as June and August were highly unsatisfactory.”
Others were more optimistic, particularly about Dubai. Knight Frank, in a 2018 look-ahead report penned by senior analyst Taimur Khan, said: “The weaker macroeconomic conditions and the growth of e-commerce in the UAE in the form of Amazon (Souq.com) and Noon, have proved to be a strong headwind for the retail sector in the UAE. However through a range of ‘Super Sale’ promotions, a weaker US dollar and continued growth in levels of tourism from more diverse range of source markets means the sector has battled back somewhat.”
Khan added: “Demand from international brands to open outlets in the UAE remains strong with the UAE ranking as the 7th most popular destination of choice for expansion among international retailers, with many preferring Dubai as an entry point into the region.”
EU to respond to any US auto tariff move: report
- Trump threatened to impose 20 percent tariff
- Shares in carmakers slip on trade war fears
PARIS: The European Union will respond to any US move to raise tariffs on cars made in the bloc, a senior European Commission official said, the latest comments in an escalating trade row.
US President Donald Trump on Friday threatened to impose a 20 percent tariff on all imports of EU-assembled cars, a month after his administration launched an investigation into whether auto imports posed a national security threat.
“If they decide to raise their import tariffs, we’ll have no choice, again, but to react,” EU Commission Vice President Jyrki Katainen told French newspaper Le Monde.
“We don’t want to fight (over trade) in public via Twitter. We should end the escalation,” he said in the comments published on Saturday.
The European Autos Stocks Index fell on Friday after Trump’s tariff threat. Shares US carmakers Ford Motor Co. and General Motors Co. also dropped.
“If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the US Build them here!” Trump tweeted.
The US Commerce Department has a deadline of February 2019 to investigate whether imports of automobiles and auto parts pose a risk to US national security.
US Commerce Secretary Wilbur Ross said on Thursday the department aimed to wrap up the probe by late July or August. The Commerce Department plans to hold two days of public comments in July on its investigation of auto imports.
Trump has repeatedly singled out German auto imports to the United States for criticism.
Trump told carmakers at a meeting in the White House on May 11 that he was planning to impose tariffs of 20 or 25 percent on some imported vehicles and sharply criticized Germany’s automotive trade surplus with the United States.
The United States currently imposes a 2.5 percent tariff on imported passenger cars from the EU and a 25 percent tariff on imported pickup trucks. The EU imposes a 10 percent tariff on imported US cars.
The tariff proposal has drawn sharp condemnation from Republican lawmakers and business groups. A group representing major US and foreign automakers has said it is “confident that vehicle imports do not pose a national security risk.”
The US Chamber of Commerce said US auto production had doubled over the past decade, and said tariffs “would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.”
German automakers Volkswagen AG, Daimler AG and BMW AG build vehicles at plants in the United States. BMW is one of South Carolina’s largest employers, with more than 9,000 workers in the state.
The United States in 2017 accounted for about 15 percent of worldwide Mercedes-Benz and BMW brand sales. It accounts for 5 percent of Volkswagen’s VW brand sales and 12 percent of its Audi brand sales.