Shops come top in floor space race

With a worldwide reputation as a shopping destination, it is no surprise that shopping centres are springing up all over Dubai. While no one would doubt that shopping is the number one pastime in Dubai, the sheer volume of mall space set to hit the market over the coming years does look a little ambitious. Construction Week spoke to Phil McArthur, director leasing & marketing, Dubai Festival City to discover whether the planned projects on site and on the drawing board will be sustainable once completed.

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By  Colin Foreman Published  April 17, 2004

Shops come top in floor space race|~|Phil Mc Arthurbody.jpg|~|Phil McArthur believes the development of other retail centres in the region will attract more tourists to Dubai.|~|With a worldwide reputation as a shopping destination, it is no surprise that shopping centres are springing up all over Dubai. While no one would doubt that shopping is the number one pastime in Dubai, the sheer volume of mall space set to hit the market over the coming years does look a little ambitious. Construction Week spoke to Phil McArthur, director leasing & marketing, Dubai Festival City to discover whether the planned projects on site and on the drawing board will be sustainable once completed. How long have you been in Dubai? I came to Dubai in 1996 to manage Deira City Centre. I was vice president and general manager there for three years before I was vice president of leasing for Majid Al Futtaim for three years. I then went to Egypt for a year and worked on remerchandising Citystars. After that job, I came back to Dubai about this time last year and began working on Dubai Festival City. It was an irresistible offer because it is such a great project with such a motivated owner, who is well organised and wants to do things in a first class manner. Does Dubai have enough shopping centres? That’s an easy answer but it is a complicated route to get to that answer. It is all about the sophistication of the retail market, the city, the country, and the region. As the region’s tastes become more sophisticated, retail has to develop as well. When people have seen something done before, they want a new shopping experience. But it can’t be trendy, its has to be something that will last for at least 10, 20 or even 50 years, because the investment required to develop a shopping centre is so great you can’t afford to just have a fad. Just 30 years ago no one had heard of Nike as a brand. Even automotive brands were not really that big until the 60s and 70s. Things have changed in our lifetime, and they will change again; the market is growing and every time someone launches a good project they reset the bar. Projects like Deira City Centre or the Burjuman in Dubai, Marina Mall in Kuwait, and the Kingdom Centre in Saudi Arabia all set new standards for the region. Given its relatively small population, can Dubai sustain so many shopping centres? Dubai is the regional hub for the growth in tourism, retail, and entertainment across the Middle East. I think the vision of Dubai is all about growing reasons, events and places for people to visit. That is why you have a tier of mega projects like Dubailand, Dubai Festival City, Burj Dubai, and Dubai Marina that are all new clusters where you will find retail, residential, office and entertainment. Some have more than others, Dubailand for example, will have absolutely everything one could ever imagine in terms of amenities, but that is almost like a separate city because it is so big. Below that first tier are shopping centres. Although many of them are great, they are not mega projects like the first tier, they are just good strong shopping centres. The Mall of Emirates, Deira City Centre, Burjuman, and Mercato Mall all fall into this category. Then there is the third tier, which includes niche malls for local neighbourhoods. For example, the Madinat Jumeirah has a 30 000 m2 shopping mall. It has a lot of restaurants and boutiques and is alongside the canal, its not a mega project but a well-done niche, which will serve its market well. When you are looking at the feasibility of a shopping centre does it depend on what type of project you are planning? Of course it does. As a developer you have to decide what the market needs. You need to make an educated decision as to what you market is, and then decide what that market wants. This means a lot of market research, lots of informal research, lots of comparison studies. From these you can make educated projections. This applies to the smallest of shopping centres up to 500 000 m2 shopping centres like Emaar is developing. Dubai Festival City is not just about a shopping mall, it is about a whole different way of living, shopping, working and playing in downtown Dubai. At present, if you want to go and relax in downtown Dubai there are not many places that you can stroll alongside the Creek. There is the Creek Park, the British Embassy area, the dhow wharfage, or you if you are a golfer the Creek Golf Course; but you can’t really engage with the water. We want to create a project where you can engage with the water and walk unrestricted along the waterfront for 4 km. I don’t think anywhere else in Dubai can offer that. It will be a unique experience, not just for shopping. It will be something for everyone, with parklands, shopping centres, hotels, restaurants, and a Robert Trent Jones II golf course. How does that relate to retail? It becomes a retail resort, with a marina the size of St. Tropez and we anticipate that a lot of people will visit the marina by boat, as it is quite a charming venue. Even if people just visit for lunch from the Creek Yacht Club it will become a destination on the Creek that is open to public boats. There will be a small fee because we have operating costs to keep the marina running and that is a nice environment for people who go sit by the water and get a nice breeze off the Creek because it naturally cools down the environment. Creek water is always cooler than the air, and as the breeze crosses it, it acts like natural air conditioning, creating a very positive environment for most of the year. Will there be too much aggregate mall space in Dubai when all these projects have finished? In total there will be 1 800 000 m2 coming on stream in the next ten years, is that too much retail? My first answer is not all of it will open on time. Dubai Festival City will. It will open on time in September 2006. Ikea will open first in September 2005 with the others opening over the following year. The current retail statistics show that retail growth is in double digits, and in some categories it is over 20% for year-on-year growth. The economy is obviously booming, and when the economy is booming people have money to spend and shopping centres are a great place to spend money. How much retail space will Dubai Festival City add to Dubai? The retail project for Dubai Festival City has 45 000 m2 on the ground floor, 45 000 m2 on the first floor, and another 45 000 m2 on the second floor. We know what we want for every location, and we are now trying to find the best operator for each location. It is not about getting the best rent, its about getting the right operator, preferably the best you can find, with greatest brand, customer service, for a good economic rent. A really good store design is also important, something that is pleasing and professionally crafted. You need to get it exactly right for the customer. How well served will Dubai be for shopping once all these projects are complete? Once all the projects are complete, Dubai will have one of the highest gross leasable area (GLA) per capita ratios in the world. This is logical because Dubai has a small population in a very affluent market with a tremendous appetite for tourism and shopping. Singapore and Hong Kong have similar characteristics, they are both on the water, are trading houses, tourist destinations, and have government-led economic strategies. In residential property, its location, location location. Is locality an important issue for malls? The number one reason why people go to convenience shop is because it is near their house, very few people drive across town to go to the supermarket shopping. But when you get into fashion, people are motivated by style so they will drive past other centres to go to the store they want to go to. And we think, if you put a really strong collection of brands together, people will be highly motivated. So we believe our market is primarily trade, split between the entire UAE and all of the tourists are our prime trade area. Where those tourists come from doesn’t really matter. As long as they come to Dubai they have to drive past us two times, from the airport and to the airport. And we think we can capture their attention. We think some people will never leave this site, go to the hotel, shop, play golf, stroll, go to a meeting if it’s a business thing, they may go to the gold souq, or city centre, but if we do a good job we won’t give them any reason to leave. We have enough room to offer everything that we can execute at a good level. This project will take years to finish, the retail will finish on time, 2005 and 2006, but the entire project will take about 11 years, so we are talking about 2015; a huge part of it will be done 2006 or early 2007. When you see other developments, do you regard them as competition? The vision is something that is very good because it will bring more people to Dubai. Once they have something that is clear, once they come up with floor plans, their mix, their architecture and how they are going to get people to the site, then we can make a judgements as to whether it is competition or not. I think that’s fair; I have not seen the Dubai Mall’s plans either but I have seen Mall of Emirates plans; I have seen Burjuman’s plans. It is a lot easier when you see the plans and you know what the anchor brands are. How can you offer something that is different? You can do different in many ways. I think we are different. We have got a marina, we are on the water, we got 250 restaurants, we got a 600 room hotel, we have got canals, we got boats, we got the greatest collection of brands. Are some of those brands in other centres? Absolutely, but I would think it is safe to say you will see 20% new. But we are encouraging retailers that have already got shop space in the area to build new generation stores. We don’t want a shop we have seen before. So if we have seen a shop in the City Centre before we want it to look completely different to that store. But it maybe the same merchandise at the same price. But what we are trying to do is put it in a better location. The fact that we put it in a better location with street front access, gives more volume, and more room to breathe, we think this is our strength. Remember we have a lot of area we can use. It comes down to a big package. Right now the retail part of Dubai Festival City is 180 000 m2 of space for rent. About 40% is already rented, and we are still two and a half years from opening. It’s all about the location, the package, the ambience, architecture, and the parking facilities. Parking is a major issue for people, in Dubai there seems to be an attitude to give shoppers the least amount of parking possible, which is the minimum the municipality requires, three stalls for every 100 m2 of shops. We are going to have double that, because we know we will have a lot of people coming here to eat, shop and walk along the Creek in the evening, and so we need to have plenty of parking for them. In total there are 12 000 parking spaces and 8000 of them will be covered. Do you think there will be more developments than just those that are already revealed? Yes, definitely. I think this place is going to grow and grow and grow. It’s safe, clean, organised, and has a pro business attitude; people seem to like it. You just have to go back 50 years, then forward 50 years with a similar projection, its not difficult to imagine big population increases over the next 50 years. This will mean more development. So you would say Dubai is underserved at the moment? No, I would not say that. Retail services have to evolve along with population and tourism growth. I think that there is some capacity for better quality retail at the present time, but in terms of total floor space it is servicing the market quite well. I would not want to see a lot of casualties. I think growth can be managed, and some of the planned mega projects may open in phases. I have never heard anyone say it will open all at once. How do you view competition from other centres in the region? I think the development of other centres in the region is good for Dubai. I don’t think that is competition but another offer from the region. People visiting from Europe may go to Qatar for a couple of days and then go to Dubai. That would be a nice combination. In all honesty I think Dubai has a few more attractions than Qatar, but Qatar could build wonderful things over the next 50 years and become a reasonable destination. The development of the region will create a critical mass for the area.||**||

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