1. shopping

Retail Therapy
IN THIS ISSUE: EUROPEAN SHOPPING CENTRE INVESTMENT BUCKS THE TREND // HOW TO
INCREASE THE VALUE OF A SHOPPING CENTRE // FRANCE AND GERMANY REMAIN ATTRACTIVE
Brochure name 9
TO INVESTORS // WESTFIELD STRATFORD CITY OPENS // AIssue
GOLDEN
10 YEARS FOR CHINA
This issue’s contributors
P03
P09
Patrick Heaps
Head of Retail Tenant Representation and
Retail Warehouse Leasing, UK
+44 (0)20 3296 4292
patrick.heaps@dtz.com
Martyn Chase
European Retail Sector Head
+44 (0)20 3296 4232
martyn.chase@dtz.com
P04
P10
Magali Marton
Head of Research, CEMEA
+33 1 49 64 49 54
magali.marton@dtz.com
P05
Arno Ruigrok
Associate Director, Multi Development
+31 182 690 636
aruigrok@multi-development.com
P12
Grzegorz Dudziak
Strategic Head of Property Management,
Central and Eastern Europe
+48 22 222 30 90
grzegorz.dudziak@dtz.com
P06
Jos Hesselink
Research, Netherlands
+31 20 840 7266
jhesselink@dtz.nl
P13
Benjamin de Aranjo
Valuation, France
+33 1 49 64 75 63
benjamin.dearanjo@dtz.com
P07
Ada Nip
Head of Retail Services, China
+86 10 6517 1281
ada.yb.nip@dtz.com
P14
Sarah Holt
Direct Investment, Germany
+49 (0)69 9210 0217
sarah.holt@dtz.com
Andrew Goodwin
Head of Retail Middle East
+971 2 667 6965
andrew.goodwin@dtz.com
P08
Hugh Radford
Head of UK Retail
+44 (0)20 3296 4179
hugh.radford@dtz.com
Cover image in silhouette courtesy of Westfield. DTZ, joint leasing agents of Europe’s largest retail centre, Westfield Stratford City.
02 Retail Therapy Autumn/Winter 2011 edition
Contents
Foreword
03Foreword
There is a lot of worrying economic news in Europe:
but retail is still proving to be remarkably resilient
in almost all countries. We are all consumers by
nature and in these challenging markets it is the
innovation and imagination of retailers that keeps
them competitive – and our retail destinations busy.
04European shopping
centre investment
bucks the trend
05How to increase
the value of
a shopping centre
06France remains
attractive to investors
07Germany provides a port
in a storm for investors
08
Westfield Stratford City
09Prime and super prime
retail news
10Crafting development
opportunities from
existing locations
12New small-scale stores
bring colour to Dutch
city centres
13A golden 10 years
for commercial retail
development in China
14
Abu Dhabi’s ambitions
This edition of Retail Therapy we hope captures the mood: demand from
investors remains high – France and Germany are particularly attractive,
as well as the UK. The diversity of DTZ’s retail coverage is highlighted in
places ranging from The Netherlands to China and to Abu Dhabi. We have
highlighted the huge opportunity for the refurbishment and redevelopment
of shopping centres throughout Europe to improve market share, income
and value. Arno Ruigrok from our client Multi Development shares our
view in his thought provoking piece and sees improving conditions for new
development in some places. At DTZ we recently celebrated the fantastic
opening of Westfield Stratford City – Europe’s largest shopping centre –
where we are joint leasing agents for Westfield.
The UK is seeing new retailers entering the market from the US and
elsewhere, which is a sign of confidence and in many cases provides a
stepping stone to other countries in Europe. Most retailers are embracing
internet retailing and the opportunity to link brands and shopping
destinations into social media is huge: we are just at the beginning.
Handled in the right way this can only grow turnover and profitability in
retail stores: even acknowledged by internet only retailers such as Amazon
using shopping centres for delivery – who knows where innovation will
take us? Our team in The Netherlands suggest the internet opens the
opportunity for smaller ‘sensation’ retailers to grow in our city centres to
give more variety and interest.
DTZ’s retail team wish you all a productive MAPIC, a successful Christmas
trading period and a lot of productive fun with new innovations for retail
and retail property in 2012.
Martyn Chase
European Retail Sector Head
+44 (0)20 3296 4232
martyn.chase@dtz.com
Retail Therapy Autumn/Winter 2011 edition 03
European shopping centre
investment bucks the trend
In sharp contrast to the prevailing atmosphere of pessimism,
the investment market for retail assets in Europe has
considerable momentum. As competition increases among
retailers, forcing them to reinvent their businesses to take
advantage of opportunistic consumption, investor interest
continues to rise.
More than €7bn has been invested in
shopping centres in Europe in the first
half of 2011, compared to €13bn for
the whole of 2010. Internationalisation
is intensifying in this segment of the
market, with 30 per cent of investment
coming from foreign inflows. This is an
encouraging figure when compared
to a ratio of 18 per cent for the whole
market over the same period.
Westfield Stratford City, London, UK
While it seems hard to imagine that this
growth trend will continue in the face
of a deteriorating economic climate,
with the slowdown in household
consumption resulting from the
austerity packages that have been put
in place across Europe, we are inclined
to think that the future is promising on
several fronts.
The major retailers will have no choice
but to review their strategies to retain,
if not improve, their market share.
Current and future sites as well as
distribution channels will have to be
reconsidered if the retailers are to draw
as much benefit as possible from weak
household consumption.
With the economies of the Nordic and
Central Eastern European countries
booming while the mature countries lag
behind, the region has never seemed
so fragmented, but at the same time
the best shopping centres have never
been so attractive to the most forwardlooking investors.
04 Retail Therapy Autumn/Winter 2011 edition
In the race for excellence currently
being played out by the shopping
centres and retail parks, only the
top performers can hope to see
their occupancy rates hold up. We
therefore expect to see acceleration
in the renovation of existing shopping
centres, primarily in countries where
the ratios of malls per inhabitants
are already high, such as Germany,
the UK and France. Elsewhere, the
construction of new shopping centres
is likely to drive the market forward,
supporting economic growth and
raising standards of living.
Two other factors likely to have
an impact are e-commerce and
m-commerce. Online retail sales
growth is effectively changing the very
act of shopping. The centres and
retail parks will have to take account
of these new kinds of consumption
by offering innovative and original
concepts, where purchasing becomes
more a consequence of time spent in a
shopping centre than a prime objective.
The opening of the Westfield Stratford
City shopping centre is effectively a
testing ground for such new retail
concepts, and investors will be keeping
a close eye on the results.n
Magali Marton
+33 1 49 64 49 54
magali.marton@dtz.com
How to increase the value
of a shopping centre
The critical factor in the success of a shopping centre in today’s highly competitive environment
as much about the quality of the retail offer as its location. To compete effectively for tenants,
centres now need to deliver 21st Century solutions by adapting to changing technical, economic,
social and sometimes political conditions.
Whether the owner seeks to increase
the value of the retail space, improve
its functionality, or reposition the centre
through development and change of
tenant-mix, the answer is refurbishment
and redevelopment.
Refurbishment is the renewal of the
existing centre, where shared space is
adapted to the changing requirements
of both tenant and consumer.
Redevelopment, on the other hand,
seeks to reposition the centre and
increase its reach.
The major areas of activity for
refurbishment and redevelopment
are architecture and planning, interior
design, mechanical and electricity,
environmental engineering, cost
management and appraisals, project
management, tenant co-ordination
and marketing.
DTZ offers comprehensive advice and
supervision throughout the refurbishment
and redevelopment processes, which can
be divided into four stages:
1. The audit and value improvement
report determines why a given centre
should be refurbished or redeveloped,
and suggests which solutions will
provide the greatest benefit
2. Pre-development stage includes
design, appraisal, tenant mix and
statutory approvals
3. Procurement involves planning
the entire process, including the
organisation of the DTZ’s consulting
team’s work and the selection of
contractors and suppliers
4. The supervision of the implementation
of the entire process.
In order to meet the increasingly
demanding needs of the contemporary
consumer and therefore become more
attractive to tenants, the majority of
commercial centres require modernisation
after 10 to 15 years of functioning. In
some cases, such as when the local
market has been saturated, this period is
reduced to five to seven years.
A good example of redevelopment can
be seen in Berlin’s Forum Steglitz, which
was owned by Hammerson GmbH.
The centre had lost its competitive
position and was struggling to meet the
needs of tenants and customers. DTZ
was appointed to increase the income
for retailers and the owner, reposition
the centre and implement solutions to
optimise operating costs. DTZ planned
and co-ordinated the construction works,
which had to be carried out while the
centre remained open.
Other recent refurbishment and
redevelopment projects handled by DTZ
include MOLO centre in Szczecin, Poland
and Regent Arcade in Cheltenham, UK. n
Grzegorz Dudziak
+48 22 222 30 90
grzegorz.dudziak@dtz.com
Retail Therapy Autumn/Winter 2011 edition 05
France remains attractive to
investors
In the coming year, pessimistic economic forecasts and the
increasing difficulty in obtaining credit are likely to have an
adverse effect on an already volatile market.
Bonneveine Shopping Centre, Marseille, France
Croix Dampierre Shopping Centre,
Châlons-en-Champagne, France
The Greek sovereign-debt issue, and
its potential threat to larger European
economies, promises unsettling times.
Inevitably, the increasing likelihood
of another economic recession will
affect the performance of shopping
centres, which have already seen
largely negative figures for both visitor
numbers and turnover in recent months.
The predicted levels of consumption
and household confidence are not
encouraging either.
In spite of all this doom and gloom,
French retail assets remain desirable
to international investors. Investment
transactions carried out during the first
nine months of 2011 follow the trend set
in 2010, when retail assets accounted
for €3bn of investment, some 26 per
cent of the total commercial investment
volume in France.
With a highly secure cash flow, prime
French shopping centres performed
well during the last economic
downturn, and they have continued to
strengthen their position by attracting
top brands and maximising rental
income. As a result, these centres
now benefit from the prospect of
growth and a reinforced position in
comparison to their competitors.
attract. Vendors will only consider bids
for core retail assets on the basis of
yields between 5 and 5.5 per cent,
while owners of competitive superregional centres are only willing to sell
below 5 per cent.
With a limited sales supply, which is
virtually non-existent for prime superregional shopping centres, investors, and
particularly new players, are focusing on
the performance of smaller sized assets
and smaller catchment areas.
This is illustrated by Grosvenor’s
purchase from Unibail-Rodamco of
the Bonneveine centre in Marseille
and the Croix Dampierre in Châlonsen-Champagne for a total of €148m,
and Union Investment’s acquisition
from Mercialys of the Pessac shopping
centre in the Bordeaux periphery for
€63m. Further transactions currently
underway also reflect this trend.
It seems likely that retailers will once
again target guaranteed performance
to the detriment of secondary assets.
Investors will almost certainly follow
suit, increasing the yield gap between
primary and secondary assets. Even
so, few sellers will cut prices and most
of them will weather the storm and wait
for a fair price. n
The compression of yields for core
shopping centres illustrates the high
level of competition these investments
Benjamin de Aranjo
+33 1 47 48 75 63
benjamin.dearanjo@dtz.com
06 Retail Therapy Autumn/Winter 2011 edition
Germany provides
a port in a storm for
investors
With GDP growth currently estimated at 3 per cent in 2011
and 1.5 per cent in 2012 (compared to 1.5 per cent and 1.1
per cent in the wider Eurozone), the German economy is
performing better than those of its European neighbours, and
is consequently perceived as a safe haven for investors.
Across the wider investment market
in Germany, the retail sector has
dominated in terms of transaction
volume. From an estimated overall
transaction volume of approximately
€22.6bn for 2011, almost half
(€10.7bn) is expected to be attributed
to the retail sector. In the first nine
months of the year, this volume
has already reached approximately
€8.83bn.
On a year-on-year basis we expect an
increase of some 50 per cent in retail
investment transactions compared
with 2010. Shopping centres are
the highest volume, followed by
department stores and retail parks.
Sales of department stores have
contributed to approximately €1bn
of the overall transaction volume for
2011, while the largest transaction of
the year so far was the purchase of
44 Cash and Carry stores for €750m
by Cerberus.
Modern retail parks in towns of more
than 100,000 inhabitants are still of
strong interest to many core investors,
particularly when let to large anchor
food tenants (sales area of at least
4,000 sq m) for longer than 10 years
and other complementary tenants
in the park. These assets are also
relatively liquid in the current market
with lot sizes typically between €15m
and €40m. Gross yields for such
assets can reach as low as 6 per cent.
Another indicator of the confidence in
the German retail investment market is
the demand for high profile development
projects. Allianz recently purchased an
80 per cent share in the €360m Skyline
Plaza development in Frankfurt. This
36,000 sq m shopping centre is due
to be delivered in 2014 and will provide
space for around 160 shops.
There also appears to be a greater
appetite than previously among
some investors to take on more
risk in the retail sector. This is
particularly the case for shopping
centres or department stores that are
fundamentally in a good location, but
have perhaps been mismanaged or
are in need of renovation. Investors can
purchase this asset type for relatively
high yields and attempt to better
manage or restructure the centre in
order to increase returns.
Overall, we continue to see
opportunities in the German market for a
wide range of investors and expect the
high level of interest in retail investment
to continue into the coming year. n
Sarah Holt
+49 (0)69 9210 0217
sarah.holt@dtz.com
Retail Therapy Autumn/Winter 2011 edition 07
Westfield Stratford City
Following DTZ’s enormous success
with the leasing of Westfield London,
we were appointed to do the same
for Westfield Stratford City. The centre
is even bigger and better connected
than Westfield London and opened
its door to the world on Tuesday 13
September to over 1 million visitors in
the first six days.
Whilst Westfield’s latest scheme will
form the gateway for the majority of
visitors to the Olympic Park for the
2012 Olympics, the concept of the
development and the anchor stores
deals were agreed before London
won its bid for the games and put
this part of London on a world stage.
In spite of what amounts to a footfall
windfall, the fundamentals for a major
retail project in this part of London
remain well founded, and the scheme
is likely to be successful long after the
Olympics have finished.
Westfield recognised a huge
opportunity in the North East
quadrant of London, which was
massively underprovided for in retail
terms. The area is home to over four
million people, including London’s
creative community, grass roots
entrepreneurs, and families and
individuals from every social and
ethnic background.
The public transport connections
are unrivalled for any major retail
destination in London, with the
Jubilee and Central underground
lines, Docklands Light Railway (DLR),
and London Overground all running
right to the centre’s front door.
Set over three levels, the total floor
area of Westfield Stratford City is
190,000 sq m. Anchored by John
Lewis department store, Waitrose and
Marks & Spencer, there are over 300
fashion, food and lifestyle brands.
There is also an external street
connecting with the Olympic sporting
venues and public transport. The
opportunities to eat are even more
developed than at Westfield London,
and in addition to a 12 screen cinema
there is a casino, ten-pin bowling and
5,000 car spaces.
Four state-of-the-art modern
workspaces are built into the fabric
of Westfield Stratford City, with an
additional campus-style business
district to the north-west of the park.
Westfield Stratford City is part of the
UK’s most ambitious regeneration
project and is Europe’s largest urban
shopping complex.
To view footage from the opening day
please visit DTZ’s retail website. n
The site for the new Stratford City
project was created from former
railway sidings, and was taken out of
the Thames flood plain by elevating
it with soil excavated from the tunnel
connecting Kings Cross St Pancras
with the Channel Tunnel.
Nearby, an extraordinary clean-up
operation has transformed a former
landfill site into the largest park
created in Europe for over 150 years.
Sustainable design, plus a network
of now clean canals, new bridges,
cycle routes and walkways mean the
Olympic Park will serve both nature
and human progress.
08 Retail Therapy Autumn/Winter 2011 edition
Hugh Radford
+44 (0)20 3296 4179
hugh.radford@dtz.com
Prime and super prime retail news
Whilst you would be forgiven for thinking
UK retail has ‘no new news’, this is
definitely not the case in prime and
super prime retail in central London and
regional retail locations, both urban and
out of town.
The UK and particularly in London is
now considered to be on a global stage.
The first full year of Westfield London
and the opening of Westfield Stratford
City have focused the minds of global
retailers on the UK opportunities in
flourishing prime markets.
The flow of US retailers entering the
UK is ever increasing. UK retail now
has a plethora of US brands, from
Abercrombie and Fitch to Apple,
Anthropologie to Juicy Couture and
let’s not forget where Gap and TK Maxx
came from.
Forever 21 has recently opened stores
in London’s Oxford Street, Birmingham,
and Westfield Stratford City, and
American Eagle and Aéropostale are on
the way. Even the homeware market is
seeing activity, with Williams Sonoma,
Pottery Barn, and Crate and Barrel
(CB2) looking for prime locations.
By contrast, UK retailers entering the
US have met with a less enthusiastic
response, although Sir Philip Green
is trying to buck the trend by
exporting Topshop to New York,
Chicago, Las Vegas and the West
Coast, following the success of his
first store in Soho, Manhattan.
DTZ’s retail affiliation with X Team
International, a group of specialist retail
brokers, gives us and our clients access
to 52 American markets. We also work
closely with the Lansco Corporation,
which has leased more flagship and
luxury retail space in the Madison
Avenue/Fifth Avenue corridor than any
other real estate company. In return,
DTZ provides US clients with a global
link stretching across 145 cities from
London to China.
Further changes are being created
by the evolution of retail property and
the relationship of the internet with
retail places.
The continuing increase of online-based
retail into UK retail centres is evidenced
by Amazon’s new trial which is in
Seattle, London and New York with a
physical presence via collection boxes in
retail malls – a development to watch.
At the other end of the spectrum,
the response of UK retailers to the
internet is a concern for some and
an opportunity for others. House of
Fraser, the country’s premier luxury
goods department store, is launching
houseoffraser.com, an extension to
their already successful online store.
The retailer has also acquired two
stores for a buy-and-collect based
retail experience, gaining immediate
physical access in Aberdeen and
Liverpool. Generally their entry is
otherwise barred by an insufficient retail
development pipeline to satisfy their
requirement for over 10,000 sq m
of department store space in key UK
locations. Now customers will be able
to buy in-store, aided by personal
shoppers, or collect pre-purchased
merchandise. With changing rooms
and seasonal displays and offers, the
House of Fraser customer will have a
physical experience to complement
buying on the web. n
Westfield Stratford City, London, UK
Patrick Heaps
+44 (0)20 3296 4292
patrick.heaps@dtz.com
Retail Therapy Autumn/Winter 2011 edition 09
Crafting development opportunities
from existing locations
Marmara Forum, Istanbul, Turkey
Despite the continuing
economic downturn, retail
development in Europe has
not come to a complete
standstill. Whilst the number
of projects and retail volume
under development or
construction has declined
dramatically, there remain
pockets of activity where
regional economic conditions
as well as the type of projects
and locations are favourable.
New projects are being developed
in some emerging markets where
reasonable recovery has coincided
with catch-up demand for space from
international retailers. A good example
is Turkey, which in our opinion is an
interesting country for shopping centre
investment at the moment. We also
expect relatively good performances
in Central and Eastern European
countries, where there is likely to be
catch-up demand from international
retailers and a continuing shift to
central and smaller city locations.
The situation is different in Southern
Europe. Most of this region remains
in rough economic weather,
and uncertainty about jobs and
income make the retail markets
hesitant. Currently, there is only
limited development of new retail,
which means investors must be
selective and pick only the very best
opportunities. As these markets slowly
recover, specific city centre locations
that connect to existing retail areas
may see new developments, since
these locations can capitalise on what
is already strong.
There is more stability in North West
European countries, not only because
the retail development market is
10 Retail Therapy Autumn/Winter 2011 edition
relatively steady, but also because a
substantial portion of activity is in city
centres. The Netherlands, Germany
and France are experiencing an
increase in city centre development,
particularly mixed-use. Whilst public
authorities are increasingly inclined
to contribute to projects to improve
urban areas, demand for retail
space remains focused on the best
locations. It is therefore only possible to
develop on the basis of strong project
fundamentals.
There is also development potential
in Nordic countries, where a lot
of shopping centres will be up for
redevelopment and (limited) extension
in the coming years. This type of
project (existing retail based as well
as investor based) is likely to be
relevant as a starting point for new
developments in other North West
European countries.
So there is still development
opportunity and, despite temporary
regional differences, this will return in
all European countries. However, the
market has changed fundamentally.
Not every project turns into gold
anymore. Only the best are viable and
sustainable. Developers need
to adopt an approach that is demand
Marmara Forum, Istanbul, Turkey
driven and based on craftsmanship,
with focus on existing locations
and qualities.
We think the retail development
market will move to redevelopment
and extension of existing retail areas
instead of development of new
shopping locations. There is likely to
be investment in existing city centres
with new retail instead of out-of-town
projects. We also expect an increase
of multi-use, where new retail projects
will be not only be places-to-buy, but
also places-to-be. n
Arno Ruigrok
+31 (0)182 690 636
aruigrok@multi-development.com
Forum Sintra, Sintra, Portugal
Retail Therapy Autumn/Winter 2011 edition 11
New small-scale
stores bring colour
to Dutch city centres
In recent years the Dutch retail landscape has
become dominated by national and international
chains that have created uniform high streets
with largely identical product offering and an
absence of local colour.
At the same time, the
spectacular growth of online
sales has prompted retailers
to turn to the internet, and
this trend will only become
stronger with improved access
to online purchasing from both
computers and smart phones.
In Holland the response has
been the growth of local
retailers who bring a variety
and a new dimension. These
‘sensation stores’ are run by
passionate entrepreneurs,
driven not only to sell the
product but also to make
consumers enthusiastic about
the product experience.
The ‘sensation stores’ tend to
be concentrated in picturesque
and historic side streets close
to prime shopping areas.
The best example of this is
9 Straatjes in Amsterdam.
Together, the stores form
unique shopping streets,
which share a number of
characteristics, that play a key
role in defining the success of
that area.
Independent traders account
for at least 80 per cent of the
retail outlets in these streets,
and most of them have an
average floor area of between
50 sq m and 100 sq m.
A maximum of 15 per cent
of retail outlets is larger than
175 sq m.
Research carried out by DTZ
Zadelhoff has ascertained that
these unique shopping streets
can be found in practically all
large shopping cities in The
Netherlands. DTZ is convinced
that their presence will play a
decisive role in ensuring that
more visitors are attracted
to shopping cities in the
near future. n
Identified unique shopping streets
Jos Hesselink
+31 20 840 7266
jhesselink@dtz.nl
12 Retail Therapy Autumn/Winter 2011 edition
Amsterdam
De 9 Straatjes
Arnhem
Kerkstraat, Wielakkerstraat, Zwanenstraat
Breda
Wilhelminastraat
Den Bosch
Vughterstraat
The Hague
Prinsenstraat
Eindhoven
De Bergen, Bergstraat, Grote Berg, Kleine Berg
Groningen
Folkingestraat
Haarlem
Kleine Houtstraat
Maastricht
Havenstraat, Maastrichter Smedenstraat,
Plankstraat, Stokstraat, Onze Lieve Vrouweplein
Nijmegen
Stikke Hezelstraat, Houtstraat
Rotterdam
Van Oldenbarneveltstraat en –plaats
Tilburg
Willem II Straat
Utrecht
Lijnmarkt, Zadelstraat
A golden 10 years for commercial
retail development in China
With China’s domestic spending power still growing,
retailers and investor/developers are targeting the retail
sector throughout the country for investment, new starts
and expansion roll-outs.
In response to this demand, DTZ
has seen the need to deliver an
integrated retail services solution
across the country. We will provide
a platform with core skills, shared
information, strategic thinking, and the
encouragement of cross-selling among
all our colleagues across the entire
China business. The core platform is
to be called the retail services platform,
which will combine the retail agency
and retail asset management (RAM)
capability, drawing on the expertise
of other departments for support
and to encourage cross-skill line
opportunities.
As China’s retail sector continues to
be fuelled by domestic consumption,
urbanisation and the appetite for
new and exciting retail offers, the
retail services platform will provide
integrated services in-line with demand
from all areas, but especially in smaller
third-tier cities.
In a review of the region’s current
economics, we discovered that the
government is enhancing macro-control
while further tightening monetary
policy in real estate. Consequently,
the development of residential
properties for short-term profit is
facing unprecedented challenges, and
institutional investors are shifting focus to
commercial real estate, which provides
more stable and long-term returns. As a
result, we expect commercial real estate
to come into a rapid development stage
in third-tier cities.
Urbanisation has been the key factor
in China’s economic restructuring.
Last year, China’s urbanisation rate
was 46.7 per cent and the urban
population reached 621,860 million.
With such massive numbers of people
congregated in cities and towns
across China, the government must
aggressively meet the demands of
the people in terms of both public
and commercial facilities, and this
will directly stimulate commercial real
estate development.
As the restructuring of China’s
economy further strengthens domestic
consumption, the importance of the
services sector in tertiary industry
becomes more significant. The service
industry, which includes general
retail, restaurant and entertainment,
helps local government to raise the
employment rate and to tax income
in the long run. Commercial real
estate provides the platform for the
development of the service industry,
and the sustainable impact on the
economy is more substantial than
for residential, which is why the
government is more supportive of
commercial real estate development.
Whilst China’s real estate industry
will face contraction, especially
in residential, the development of
commercial real estate will receive
support from government through
the drive for urbanisation. Within the
next decade, the third and fourthtier cities will hit a peak of largescale construction, increasing the
consumer population by around 130
to 180 million. For these reasons, we
believe that commercial real estate
development in third and fourth-tier
cities is about to experience a golden
10 years. n
Dongcheng Sky Mall, Linfen City, Shanxi
Ada Nip
+86 10 6517 1281
ada.yb.nip@dtz.com
Retail Therapy Autumn/Winter 2011 edition 13
Abu Dhabi’s ambitions
Abu Dhabi, the capital of the United Arab Emirates, boasts a fabulous
array of buildings along its Arabian Gulf fronted corniche. Amongst these
are the headquarters of the National Oil Company, which controls 8 per
cent of the world’s known oil reserves, and the shimmering HQ of ADIA,
the sovereign wealth fund that co-invests with Hammerson and more
broadly throughout the world.
In spite of such obvious wealth, the capital has
been considerably slower in driving domestic
development than its neighbour Dubai, which
sits 150km north along the coast.
Dubai has established itself as the region’s
commercial centre and one of the world’s
highest ranking cities of internationally branded
retailers, but older schemes are struggling to
fill the gaps left by the flagship stores that have
moved to the latest larger dominant shopping
centres, such as the Dubai Mall and the more
established and recently extended Mall of the
Emirates.
Some way behind its neighbour, Abu Dhabi
began its development cycle in 2004 and was
showing the first signs of success when the
financial crises brought a series of reviews and
postponements.
Abu Dhabi’s urban catchment is estimated as
just over 1 million rising to over 1.2 million by
2014. Whilst the population is dominated by
non-nationals, the Emirati population make
up the majority of the spending profile, with
Western ex-patriots accounting for only 8 per
cent of the total spend.
The organised retail market in Abu Dhabi
is predominately shopping malls, the most
successful of which remains Marina Mall on
the seaward peninsula. The existing supply of
shopping space equates to 1,442,000 sq m
and is forecast to grow beyond 2,460,000 sq m
by 2013, assuming the successful completion of
the malls currently under construction, and Yas
Mall and Reem Mall (totalling 438,000 sq m),
which are proposed. Once this space has been
realised, there is no clear quantitative demand
for further retail.
14 Retail Therapy Autumn/Winter 2011 edition
In the short-term, the bulk of the forthcoming
space will not compete with Dubai in its retail
offer, due to the relatively small scale of individual
schemes. But in three years the 238,000 sq m
Yas Mall is due for completion by Aldar, and this
should begin to redress the balance.
DTZ’s leasing and retail advisory team is right
in the heart of this very active market, having
undertaken valuation and peer reviews on each
of the major proposed malls. DTZ is leasing
140,000 sq m of shopping floor space opening
in 2012, evaluating the need for tenant mix and
footfall drivers, while supporting the developers’
rental aspirations.
Abu Dhabi’s rulers have long-term plans to
challenge Dubai’s pre-eminence. Infrastructure
is already completed, and a programme is
underway for an impressive range of business,
cultural and sporting locations, which should be
second to none when the Abu Dhabi 2030 Plan
reaches its conclusion. n
Andrew Goodwin
+971 2 667 6965
andrew.goodwin@dtz.com
Marina Mall, Abu Dhabi
Average Rent for Leading Abu Dhabi Malls
Average Rent
AED psm
Average Rent
GBP psm
Marina Mall
2,900
500
Abu dhabi Mall
2,700
466
Wahda mall
2,700
466
Khalidiyah Mall
2,400
414
Madinat Zayed
1,800
310
Raha Mall
1,200
207
Dalma Mall
1,600
276
Mushrif Mall
2,600
448
Central Market
3,000
517
Mall
Source DTZ
Existing
Under construction
Proposed
Retail Therapy Autumn/Winter 2011 edition 15
Disclaimer and confidentiality clause
This report should not be relied upon as a basis for entering
into transactions without seeking specific, qualified, professional
advice. Whilst facts have been rigorously checked, DTZ can take
no responsibility for any damage or loss suffered as a result of any
inadvertent inaccuracy within this report.
Information contained herein should not, in whole or part, be
published, reproduced or referred to without prior approval. Any
such reproduction should be credited to DTZ.
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www.dtz.com