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Location, location, location. If ever there was a term that truly defined the long term outcome and potential financial rewards for developers of residential housing stock in recent years, it is this.
Yet with the Middle Eastern markets having the luxury of being able to often use a blank canvas as the residential development blueprint for success, this term has less significant implications than in some other, more mature markets.
However when considering new retail developments - and there has certainly been a few more in the past week, in the wake of the recent Middle East Council of Shopping Centres (MECSC) convention, location is all that matters. Consequently, this dictum forms such a significant basis on which the decision of possible new retail developments should be based, that developers now view site selection as the most important long term strategy for the success of new retail ventures.
Such is the extent of this belief that many new retail ventures are now only entered into with the security of several large anchor stores having already agreed on their leasing contracts. With this strategy in mind, the advantage that many of the retail developers in the region have is that many operate retail, as well as development divisions and consequently, anchor sites are usually leased before a brick has been laid.
However with so many new retail sites and developments coming on-line in the next 5 years or so, there is an associated increase in the demand for precise analysis and demarcation of preferential retail sites.
The implications of not choosing the wealthiest, most densely populated or those areas that are the most under-retailed could ultimately have unrecoverable consequences for developers.
Mutual understanding
As such, trends in other markets exist where potential development opportunities are now being entered into on a mutual understanding basis. Where retailers themselves identify specific projects or development opportunities, and subsequently approach the developers with an operational strategy that benefits them both.
This particular policy has many positive implications. Firstly the retailers are happy because they eventually profit from entering into a specific market segment that offers them strong returns. Secondly, the developers have the luxury of being able to plan a leasing strategy around tenants that are already on board from day one. Lastly, from a general partnership point of view the centre or mall is the ultimate winner as the development process begins with a strong retail brand backing, off the back of which a robust tier of secondary tenants will come on board.
So if this trend of piggy-backing the development opportunities of retail brands is such a winning formula, why don't we see more of it here? In actual fact I think that we probably do, however with many of the larger retail brands' exposure to the market also being linked with large retail development companies, I am of the opinion that many of the new opportunities are selected on the grounds that these specific sites will ultimately be driven by the long term success of some specific brands.
The problem with this strategy in the Middle East is that for retail success, we are often very dependent, not necessarily on a critical mass of a resident population, but on the transitory movements of a largely tourist population. Consequently the process of correct site selection for new retail developments has to meet the demands and expectations of both the tourist population, as well as those of the resident population as well - a developmental double edged sword, if ever there was one.
- The writer is Head of GRMC Retail Services, Dubai.
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