Retail

Retail

In most parts, the retail sector in the GCC has faced unprecedented levels of demand over the recent past, where many developers and retailers have benefited from the effective handling of the pandemic, strong economic growth and surging footfall numbers. As a result, in a number of key markets, we are now facing a distinct lack of quality stock, particularly in the regional and super-regional mall categories. A major challenge which remains prevalent in the sector is that secondary and tertiary assets are still to witness any meaningful and sustained recovery, and we are unlikely to see this change without capital expenditures and asset repositioning.

In Bahrain, although the average occupancy rate has increased in 2023, there are a number of retail assets which continue to see occupancy rates remain stagnant or decline. As a result, many landlords are having to accept an occupier favoured market. With supply expected to increase in 2024 and beyond, we expect that the occupier favoured market is set to continue, and even become more exacerbated in secondary assets. On the back of this, we expect that average rental rates will continue to fall in 2024, although this will be at a slower rate than in 2023.

In the UAE, in 2023, average rents increased in Abu Dhabi and Dubai by 10.7% and 17.6%, respectively. Looking ahead, we expect that the levels of demand in both Abu Dhabi and Dubai will remain strong. However, the lack of quality stock, particularly in Dubai, remains the most significant concern. Given this, we expect that new rental registrations will continue to edge down, although total demand will remain net positive. Rental rates are expected to continue to increase, however, we do expect that the rate of rental growth will moderate in both Abu Dhabi and Dubai.