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28 March 2024

MoE buoyant amid recession

Fuad Sharaf, Vice-President of MoE, says the launch of the Metro will boost the mall's business. (DENNIS B MALLARI)

Published
By Mustafa Alrawi

Mall of the Emirates (MoE) is one of the UAE's most resilient businesses to the current economic downturn, according to the man responsible for running it.

Fuad Sharaf, Vice-President of MoE, also expects a combination of the launch of Dubai Metro and an under-construction retail extension to boost performance in 2010.

He is confident the mall will repeat 2008's "exceptional" performance this year in terms of both sales and footfall, offering its retailers a bright spot in an otherwise uncertain trading environment.

"We are maintaining footfall. Average footfall in MoE used to be and still is 70,000 to 80,000 people on a normal day, during the weekend it goes up to between 100,000 and 110,000," Sharaf said.

Since it became fully operational in 2006, according to Sharaf the mall has seen the number of visitors increase more than 30 per cent to 30 million last year, which he expects to remain stable in 2009.

"The growth was there on a yearly basis. The first year we had 23 million visitors to the mall. In 2007, we had 27 million. Last year we had 30 million visitors to the mall," Sharaf said.

So far this year, footfall seems to be on track, as indicated by the latest figures announced by Majid Al Futtaim Group (MAF), MoE's owner, showing 2.7 million people visited the mall in a 30-day period between June and July this year, due to the annual Dubai Summer Surprises promotion.

"We had three phenomenal years. The growth was there from a sales and footfall perspective. Last year was one of the greatest years we had, so for us during this recession we had set our goals and objectives to maintain or achieve what we have achieved in 2008. We are going towards that in 2009," Sharaf said.

However, retailers in the UAE say they are experiencing a drop in sales – anywhere from 10 to 30 per cent compared to 2008 – as the effects of the economic global downturn take hold locally.

Vipen Sethi, CEO of Landmark Group, which owns the Home Centre and Babyshop brands, said: "Our outlets are spread across the Emirates. The retailing business has been tough in July; Dubai in particular has felt the strain of the global meltdown purely due to a larger population of resident expatriates coupled with the migratory trend in this holiday season."

"The strains brought about by current recessionary trends resonate across shopping formats and MoE has proved to be no different," Sethi said.

Sharaf concedes that retailers have been forced to reduce margins to retain business and shore up flagging sales. "Now the retailers are living the recession. They want to gain more customers not lose them. They are reducing margins. [There are] lots of promotions and sales across the city," he said.

While the mall business is not immune to the malaise affecting the wider economy, the bigger names are proving better positioned to weather the crisis. MoE seems the best placed of all.

Over the past three years, Sharaf said, retailers at the mall have seen sales growth of 20 to 30 per cent on a yearly basis accounting for the low turnover of stores at MoE since it opened in 2005.

"People are sticking to their places definitely. Whoever will make gold out of a place will never leave it," he said. And, even now, at a time when consumer spending has fallen in the Emirates, outlets at MoE appear to offer stronger performance than other locations for many retailers.

JP Nambiar, Head of Retail at Jumbo Electronics, said: "We have continued to attract new and existing customers to our Mall of the Emirates store, thanks to its optimal location in one of Dubai's largest malls.

"Overall business across all our retail stores has seen a decrease compared to last year due to the fallout of the local property market and the global economic crisis.

"High street stand-alone stores have been the worst affected, while mall stores continue to attract footfall, especially at weekends." Although he accepted that footfall at the 27,000 sq ft Jumbo store had fallen, Jumbo's outlook for next year was bullish.

The secret to MoE's success, Sharaf said, includes its track record combined with attention to detail and decade-long experience that MAF brings to each mall its opens. Demand remains high from both consumers and retailers at the mall with a "long list" of stores wanting to get in on the action.

But MoE has also grown into a community and social hub for people living in New Dubai – a meeting place for both friends and business partners – and its presence has helped build the surrounding area of Barsha into one of the most popular locations to live.

"This is one of the secrets. Wherever MAF builds a mall, it creates that community. Automatically, it comes with the mall itself," said Sharaf. He said the mall works closely with its retailers to improve the environment for shoppers and tenants. The relationship is an important one for the business' success and Sharaf calls MoE's tenants "partners".

The business model of the mall itself is reliant upon the success of its partners, not just in terms of rent and reputation but also because the mall takes a cut of sales based on an internationally recognised system of targets that many malls around the world operate between landlord and tenant. And dialogue is frequent and critical to the success of the business. This year's annual meeting between mall management and retailers was a positive discussion regardless of the current economic crisis, Sharaf said.

"The retailers are doing very well at the MoE… there are no complaints," he said. "The meeting went very well, we shared our views our plans for the future, it was a very normal meeting like every year. There was confidence on both sides, the retailers and mall management."

Sharaf said rents at the mall were currently a non- issue and no retailer had discussed lowering rents with mall management. This may be down to sustained demand and success at MoE, as Sharaf said, but it could also be that rents will become an issue further along the cycle.

"As a prudent retailer, we were one of the first to have approached our respective property owners back in December 2008 when the crisis showed signs of it affecting this market. Discussions regarding the adjustment of rental rates to accurately reflect the current state of the market are ongoing," Jumbo's Nambiar said.

The much anticipated launch of the Metro next month is expected to boost the economy and, particularly for retailers next to stations, improve the flow of customers. One of the bigger stations will be at MoE and will include its own retail extension connecting it to the mall.

"We are expecting a positive impact from the Metro. We expect lots of people to come through it, especially tourists," Sharaf said. "This will add great value to the business. That's why when we thought about the extension we thought about the services – we have ATMs, customer service desks, Borders Express, UAE Exchange, all the retailers that provide services for these types of customers"

Despite all this expansion, there are overall concerns that there could be over-supply of retail space in Dubai eventually leading to lower rents and lower growth. Sharaf, however, believes MoE is meeting an existing and ever growing demand.

"MoE is a landmark... as a brand we are strong enough and today we are proving this by expanding the mall, adding 40 retailers, that means that demand is very high at MoE," Sharaf said.

"We are having the Metro extension plus a new four-star hotel on the east side of the mall. These are all indicators… We didn't move into these projects without being sure there was demand."

He said the government authorities concerned were keeping an eye on such issues as over-supply and would step in to stop more malls being built if necessary. But, he said, MAF's plans to open Mirdif City Centre in the first quarter of 2010 was a further indication of the company's confidence.

"For us, being in the market, we think Dubai can take more shopping malls, that's why we are expanding. We are still expanding [because] the demand is there. The business in Dubai is very promising," Sharaf said.

 

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