Challenging times for UAE retailers, but Dubai well positioned

Footfall and occupancy rates in prime retail space in Dubai have showed no sign of weakening — although some secondary locations have suffered. (Shutterstock)
Updated 17 February 2018
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Challenging times for UAE retailers, but Dubai well positioned

LONDON: Continuing weakness in UAE retail markets has been highlighted by disappointing earnings results from companies such as Dubai retailer Marka.
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.”


Mideast plays key role in Chinese export of armed drones, report says

Updated 17 December 2018
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Mideast plays key role in Chinese export of armed drones, report says

  • China has exploited America’s selective drone export policy to become an increasingly influential player in meeting demand
  • The report is entitled “Armed Drones in the Middle East: Proliferation and Norms in the Region”

BEIRUT: The use of armed drones in the Middle East, driven largely by growing sales from China, has grown significantly in the past few years with an increasing number of state and non-state actors using them in regional conflicts.
That’s according to a new report by the Royal United Services Institute, or RUSI. The report was released on Monday. It found that more and more Mideast countries have acquired armed drones, either by importing them or by building them domestically.
China has exploited America’s selective drone export policy to become an increasingly influential player in meeting demand.
The report, entitled “Armed Drones in the Middle East: Proliferation and Norms in the Region,” says China is likely to continue playing a key role as supplier of armed UAVs to the region.