Dubai: As the global econ-omic downturn caps consumer spending from the US to India, Dubai is also reeling under its effects.

However, retailers and developers are quite confident the demand for retail space will keep growing in Dubai and as the emirate keeps expanding, there will be no real danger of over-supply of supermarkets here.

Shopping space in the GCC has expanded quite rapidly over the years, with some 7.5 million square metres completed in just nine years. In 2008 alone, Dubai clearly led the boom, adding about 2.5 million square metres of GLA (gross leasable area), the highest in the region.

The prospect that such a speedy growth will continue for years to come isn’t promising because some projects are likely to be put on hold or deferred completely. And industry sources have more reason to believe that even if things get better, the demand for additional retail supply in the Gulf boomtown would ease.

“There is a view beginning to emerge that the worst of the global recession may have been reached and the situation will begin to improve next year. Even when this happens, it seems improbable that the rapid boom will re-emerge, in which case the requirement for mega mall space in Dubai is likely to be much reduced - if any,” Simon Thomson, principal at British consultancy firm Retail International, told Gulf News.

What is likely to happen, Thomson says, is that existing malls will be improved or extended. “There are new malls still in the development stage and these will come on stream.”

Still, more retail spaces, particularly in Dubai, have been put on stream this year. Among the new entrants are the Oasis Centre on Shaikh Zayed Road and Arabian Centre near Mirdif. But this is more the case of finishing what had been started or simply looking ahead.

Thomson explains that shopping malls are large real estate developments that require several years in the planning and several more to construct and deliver. It is inevitable therefore that there will be fluctuations in the market and economy over such a period of time.

“The global economy has had an unprecedented run of boom years which finally ran out of steam in 2008. This was always to happen - it was just a matter of timing. Dubai was the beneficiary of these boom times and now in the downturn is not immune just like every other country. The recent G20 summit in London last week confirmed the unanimity of this point,” Thomson says.

“Thus, if a mall has been under development for some time and has been scheduled to be completed in 2009, there is little one can do other than proceed. It may be necessary to work with the retailers to assist them in the more difficult trading conditions, but most serious retailers and mall developers are in the business for the long term and will be looking beyond the immediate difficult trading conditions,” he adds.

Retail International’s survey shows that so far, some 9.5 million square metres of GLA has been completed in the GCC, up from 7.75 million square metres a year ago. There is an “underlying potential” that the shopping space could further expand to 19.6 million square metres over the next 10 to 15 years, but “timing is now less certain with some projects likely to be either deferred or shelved completely”.

Despite the gloomy outlook, mall developers and retailers remain confident that Dubai’s consumers will continue to accommodate new shopping spaces.

Vipen Sethi, chief executive officer of Landmark Group, which recently opened Oasis Centre, says: “It is true that retailers in Dubai are facing declining sales due to recessionary trends in the market. Consumer spending is at a low as the confidence levels of people are low.

“A number of jobs have been lost and Dubai’s population is expected to fall in the short time. When business in airlines, hotels and residential properties starts to pick up, the current retail space will not be sufficient to meet the growing requirements,” Sethi adds.

“Mall developers and retail operators need to pitch themselves appropriately like in other countries. There are bound to be some malls that work and others that don’t.”

Kamal Vachani, director of Dubai-based retailer Al Maya Group, says there is still room for new shops in Dubai, although things in the retail industry are not looking as bright.

“There has been a little bit decline in consumer spending, where the customers reduced the purchase of luxury items.

“But the sale of other supermarket items has not changed. There’s also some decline in business in the areas where labourers are staying. Due to the recession in the property market, a lot of expat labourers lost their jobs,” Vachani told Gulf News.

“But as Dubai’s areas are expanding and new areas are opening up, I would not see any oversupply of supermarkets,” he adds.

(Published by Cleofe Maceda on http://www.gulfnews.com/ on April 13, 2009)