Dubai’s Nakheel has awarded nearly Dh2.3 billion worth of contracts to build three new shopping centres in the emirate as the developer attempts to become the biggest mall operator in the country.
The Dubai Government owned company said yesterday that it had awarded contracts to build a total of nearly 2.3 million square feet of shopping space in three malls building more than 6,700 shops, cafes and restaurants which are all due to be completed in 2018.
The largest of these was a Dh1.17 billion contract awarded to United Engineering Construction (Unec), also based in Dubai, to build the company’s much-hyped Deira Islands Night Souk.
The souk, which will be located on Nakheel’s Deira Islands, four manmade islands off the coast of Old Dubai, will comprise 1.2 million square feet of leasable space making up 5,300 shops and 96 quayside cafes and restaurants.
In November Nakheel reported that it had leased all of the shops and cafes in the night souk had been leased within five days of being put on the market.
Further inland, Nakheel also awarded a Dh775 million contract to the Dubai contractor Ginco General Contracting to build its planned 650,000 square feet Warsan Souk, which will be located in the developer’s new Warsan Village gated community between Sheikh Mohammed Bin Zayed Road and Manama Road, next to International City.
Warsan Souk will comprise 1,170 shops including two department stores and 30 cafes and restaurants in eight buildings. Each building will include two floors of shops with a total of 433 three-bedroom residential properties built above.
And at the other end of the city Nakheel awarded a Dh353.75 million contract to Gulf Technical Construction Company to build its planned 432,000 square feet The Circle Mall between Sheikh Mohammed Bin Zayed Road, Al Khail Road and Hessa Street in Jumeirah Village Circle.
The mall will comprise 235 shops, a multi-screen cinema, a health clinic, cafes, restaurants and a food court. Nakheel said that about half of the leasable space had been reserved by retailers with tenants including Spinneys, Oscar Cinemas, Sports Market, Early Learning Centre, Mamas & Papas, Grand Optics, Tips & Toes, Bare Salon and Supercare Pharmacy.
With its portfolio of developments, Nakheel looks on track to overtake rivals Emaar and Majid Al Futtaim and become the biggest shopping centre operator in the UAE as it switches focus to generate more recurring revenue.
Nakheel, which operates 3.4 million square feet of mall space at its Dragon Mart and Ibn Battuta malls, is working on 10 new large-scale developments and a raft of community retail centres comprising more than 10 million square feet of leasable retail space.
Nakheel, which is known for building the giant palm-shaped manmade islands off the Dubai coast has taken a more cautious approach to development since being recapitalised as part of the 2009 Dubai World debt restructuring.
Since then has focused less on huge capital-intensive mega projects and more on developing recurring revenues with shops and hotels high on its agenda.
Retail projects in Dubai have performed particularly well over the past few years. According to the latest figures from the property broker JLL, average rents in primary malls rose by 2 per cent over the year while retail vacancy rates across the city currently stand at about 8 per cent.
Emaar Malls, the owner of the Dubai Mall, reported in July that visitor numbers in the first half of 2015 rose to 62 million – up 11 per cent on the same period a year earlier – and helping the developer to a Dh412 million second quarter profit.
However, analysts warn that the city’s retail market is starting to slow down as the strong US dollar and a dip in the number of high-spending Russian visitors take their toll just as a glut of new space hits the market.
According to JLL some 403,000 square meters of new mall space is set to be completed next year, prompting retail rents in the city to start to fall.
“We expect rents to drop over the 12 months as the market moves through its cyclical peak,” said Craig Plumb, the head of research at JLL’s Dubai office.
“The retail market remained subdued over the third quarter as annual rental growth rates across all mall types continued to slow down.
“There are signs that landlords have recognised this softening and have adjusted rental levels to more realistic levels in order to differentiate their offerings in the face of strong competition,” he added.
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