Falling rents boosting Dubai’s retail competitiveness

With Dubai currently ranked No. 2 globally in terms of the number of international retailers present in the city, the emirate is close on the heels of the No. 1 ranked London, and may even surpass it, boosted by falling retail rentals in the city, which is further enhancing its global competitiveness.

According to global real estate consultancy CB Richard Ellis, 55 per cent of the world’s retailers have a presence in Dubai, only marginally lower than the 56 per cent in London. “Dubai is closing in on London,” CBRE said in its latest global report on retail for the third quarter of 2010.

While Dubai is already ahead of some of the other global traditional retail destinations such as Paris (where 46 per cent of international retailers are present), New York (44 per cent) and Hong Kong (43 per cent), with its ever competitive retail rentals, that gap with London could close sooner than later.

For, even as retail rents in London grew almost 20 per cent year-on-year in Q3 2010, making it more expensive for new retailers to set up shop in the city, Dubai retail rents continue to slide and, according to an Emirates 24|7 analysis of data provided by real estate consultancy Better Homes, declined by almost 5 per cent YoY, making it one of the most attractive cities for the world’s retailers.

Indeed, London is the fourth most expensive city in the world in terms of per sq ft retail rents while Dubai is no longer even among the top 20.

The Emirates 24|7 analysis of Better Homes data shows that the largest annual declines in prime retail rentals were witnessed in Jumeirah Lake Towers (12.5 per cent) and Jumeirah (11.76 per cent). The ongoing rentals (the latest figure being of October) for retail spaces in Jumeirah is between the range of Dh140 and Dh160 per square feet as opposed to Dh160-180 per square feet last year, registering a drop of Dh20 per square feet.

For Jumeirah Lake Towers, rents have declined by Dh15 per square feet this year. Current rates are between Dh90 and Dh120 per square feet as opposed to Dh110-130 last year, according to Better Homes.

Mirdif, Al Quoz, Barsha and Dubai Marina have also registered annual declines in retail rent, with rents in Barsha sliding 6.6 per cent (a fall of Dh7.5 per square feet). The average rates vary from Dh90-120 per square feet to 100-125 per square feet.

Dubai Marina has fared marginally better with a 4.65 per cent drop (a fall of Dh10 per square feet). The rents are between Dhs180-230 per square feet in October of this year as opposed to Dh200-230 during the same period.
Better Homes data shows that rents in TECOM have come down to Dhs140-180 per square feet as against Dh150-180 square per feet, registering a decline of 3 per cent or Dh5 per square feet.

Al Quoz has also seen rents falling for retail spaces. The rentals vary from Dh80 to Dh100 per square feet. The change has been seen only on the higher side as minimum rents continue to be same as last year (Dh80-120 per square feet).

Rents in areas such as Deira, Umm Hurair, Dubai Healthcare City, Trade Centre, Dubai Investment Park and International City continue to hold.

Nevertheless, with Jones Lang LaSalle, another property consultancy, predicting that new supply will further push down commercial rents in Dubai by as much as 20 per cent in 2011, there’s every reason to be bet on a continued retail revolution in the emirate.