01-07-2009 - The two major emirates of the UAE (Abu Dhabi and Dubai) first time in history that their retail rents collapse at least a decade in the 1st Quarter.

Dubai has 11% as their cost of leasing while 3.5% in Abu Dhabi in the first 3 months of this year as weigh against last year, according to the EU-27 Retail Rent Index conducted by CB Richard Ellis.

CBRE’s Senior Director for Retail and Industrial Property for MENA, Mark Morris-Jones, stated that, “this was the first reduction in rents in at least 10 years and reflected the decrease in retail sales caused by the global economic downturn”. In addition, “Demand is fuelled by their expectations of business and how they expect to do in terms of sales. And if their expectations, given the way the market is in the moment, is that they’re not going to do so well, they’re not going to have a demand for retail property. Rental rates remained higher in Dubai than in the Abu Dhabi, at Dh400 (US%$108.9) a sq.ft. in Dubai against Capital with Dh280 a sq.ft”.

Majid Al Ghurair, Chairman of the Dubai Shopping Malls Group, “Retail sales in Dubai have dropped between 20% and 25%”.

Craig Plumb, Jones Lang LaSalle MENA, Head of Research, “this, coupled with the amount of new retail space that has come on to the market in recent years, has made Dubai a tenant’s market. And that, What you are finding now is retailers have got a lot more choices, so it is good bargaining position for retailers”.

Research Firm, RNCOS, said, “Dubai is expected to have 4.25 million sq.m. of retail space by next year, up from 1.17 million sq.m. in 2006”.

For the past eight months there were 4 malls have opened in Dubai alone that includes the 1.12 million sq.m. Dubai Mall considered to be the world’s largest.

AT Kearney, stated, “Abu Dhabi has about 700,000 sq.m. of gross leaseable area, and plans to almost double that to 1.2 million sq.m. in the next two years”.

Morris-Jones, added, Abu Dhabi’s rents remain relatively stable because in a addition to tight supplies, retail sales have held up in the capital. There is not the amount of retail space, but more importantly, it is more stable market.

Meanwhile, “Dubai is very dependent on tourism and tourism has dropped off”.

Chief Executive of Cravia, owner of the local licenses for Roadster Diner and Cinnabon, Walid Hajj, “but retailers locked into leases have had little success in negotiating discount rates. I have asked for rent reductions at most of Cravia’s 35 outlets to compensate for slowing customer traffic but the rates have stayed the same. The payment was estimated between Dh400 and Dh1,400 sq.ft. dropping down by 11%, sounds good but didn’t think we’ve realized it”.