Nakheel continues push into Dubai retail with second Al Furjan mall
Nakheel’s aggressive push into Dubai’s retail market shows no sign of abating as it presses on with community malls, with another planned at Al Furjan.
The developer plans to announce the project imminently, according to people with knowledge of the matter.
The second mall at Al Furjan – a development with plans for 2,200 villas near Jebel Ali, built by Nakheel and third parties – follows the first, which is fully leased and set to open next year.
Nakheel’s new mall will sit alongside a growing number of smaller offerings and 10 new large scale developments ranging from the 3 million square feet Deira Mall to the 432,000 sq ft Circle Mall in Jumeirah Village Circle. All the projects are due for completion in the next five years.
The developer of Dubai’s Palm islands plans to more than quadruple its leasable retail space to more than 11 million sq ft from the existing 2.5 million sq ft at its Dragon Mart and Ibn Battuta Mall developments.
“Our chairman told us we must have an income stream of Dh7.5 billion from retail leasing over the next three to five years,” said Omar Khoory, a director of Nakheel Retail. “When our 11 million sq ft of developments are complete, we will be moving close to that figure. Right now our income stream is 80 per cent development versus 20 per cent non-development.”
The non-development part of Nakheel’s business includes its malls and hotels operations.
Experts say that UAE developers offer a host of retail options because the retail environment offers returns beyond most mature markets, but they warn that the amount of future supply could become burdensome.
“The community malls are a great idea because they have captive markets that need fulfilling,” said Craig Plumb, the head of research at the property consultants JLL. “A possible problem with the amount of space coming on stream is the amount of choice for retailers. Retailers will not be able to be present in all of them, meaning there will be winners and losers.”
Property consultants say rent increases are not likely, but are equally sanguine about the likelihood of a dramatic falls in rates because of new developments. A likely impediment to retail rates are global economic conditions.
“Dubai hasn’t had a major mall delivered in five years and the timeline for delivery of these new malls is over a five-year period,” said Matthew Green, the head of research for CBRE.
“That means that the new malls can dry up some of the waiting lists of prime retail space. The economic headwinds that Dubai is facing is more likely to slow rents.
“The weakness of the Russian tourist market and the strength of the dollar, making the UAE an expensive place to visit, means that demand is dropping and we are already seeing a flattening of retail rents.”
