Welcome!/Maharba!
This is the weblog by the Retail Guru at Retail International®. The source of retail information in the MENA Region.
The latest ‘Annual Report’ by Retail International® – “The Annual Report 2011-2012″ has just been published. Reporting on the retail situation for shopping malls across The Arabian Gulf and North Africa following the events of The Arab Spring and takes into account the gathering storm clouds in the Eurozone.
Based on more than 300 malls it is available as a free download from www.retailinternational.co.uk
Note: Retail International® have been publishing reports on the Middle East retail scenario such as this since the 1990′s.
Tesco expands virtual shopping after successful S. Korea trial
Tesco’s trial of virtual shopping in a South Korean subway station is set to be expanded next month and could pave the way for similar hi-tech ‘stores’ in the UK.
Recently, Tesco’s Korean arm Home Plus transformed Seoul’s Hangangjin Station into a ‘virtual supermarket’ by pasting posters of stocked shelves onto platform walls and inviting commuters to ‘shop’ by scanning QR codes with their smartphones. The contents of the shoppers’ ‘virtual baskets’ were later delivered to their homes.
The trial was so successful that it is being extended to other Seoul subways next month with a view to rolling the format out across South Korea within two years.
Irene Lam, a spokeswoman for Cheil Worldwide (the global marketing agency that helped develop the store) said: “The concept made sense. The trial boosted Home Plus online sales 130% and online members 76%.”
According to experts, the concept’s next stop could be the UK.
Egypt risk: Alert – Revolution hits roadblocks
July 11th 2011
FROM THE ECONOMIST INTELLIGENCE UNIT
SUMMARY
Egyptians returned to Tahrir Square on July 8th in the biggest demonstration since the former president, Hosni Mubarak, stood down. They came to voice their disappointment over the absence of tangible progress since the revolution, with many professing to have lost faith in the country’s military leadership. Youth groups have threatened to stage a general strike and engage in civil disobedience if their demands are not met. Such ongoing upheaval threatens to derail the transition process and may give the ruling military council cause to delay elections, which are scheduled to take place in September. Its impact on Egypt’s already weakened economy would be pronounced.
Point by point
It is five months to the day that the Mubarak regime collapsed, but Egyptians feel they have little to show for it. At the heart of the latest unrest, which began in late June, is a demand for justice for those killed during the revolution. Recent incidents, including police clashes with victims’ families in Cairo and the release on bail of police officers accused of killing demonstrators in Suez, are seen as signs that not much has changed. Slow progress on the trials of members of the former regime has also angered Egyptians.
Responding to the latest protests in a televised speech on July 9th, the prime minister, Essam Sharaf, appeared worn out by the pressures of office. He promised that all police officers implicated in attacks on protesters would be suspended, and courts handling their cases would focus on these exclusively to speed up the process. In addition, he said he would establish a permanent mechanism for national dialogue and had asked the social solidarity minister to set up a committee to deal with demands for greater social justice. But many Egyptians have dismissed Mr Sharaf’s promises as too little too late, and several presidential hopefuls have echoed this view: Mohammed ElBaradei, Amr Moussa, Abdel Moneim Aboul Fotouh, Hamdein Sabahy, and Ayman Nour have urged the army council to respond effectively to the demands of the revolution.
Since the revolution, the opposition movement has struggled to present a united front and articulate a coherent set of demands. Now several political groups have drawn up a list of clear, if still broad-ranging, requirements. These include calls for the country’s leadership to define the competencies of the Supreme Council of the Armed Forces versus the government; for the prime minister to be allowed to dismiss and appoint new ministers and governors; for the cabinet to be purged of ministers associated with the old regime; and for the dismissal of the interior minister. In addition, the demonstrators have demanded that all police officers facing charges of killing protesters during the revolution be fired immediately, and called for the dismissal of the public prosecutor as well as for the public trial of the former president, Hosni Mubarak, and members of his regime.
Other demands include issuing a law to bar members of the former ruling National Democratic Party from standing in parliamentary and local council elections; freeing all civilians tried by military courts and retrying them in civilian courts; and abolishing a law banning strikes and demonstrations. In addition, the protesters want the government to scrap the new 2011/12 budget in favour of one that would address the needs of Egypt’s poor.
Re-reshuffle
At an emergency meeting with youth leaders on July 10th, Mr Sharaf vowed to reshuffle his cabinet completely by July 17th and replace governors by July 25th or resign, according to Al Ahram, an Egyptian daily. Another reshuffle would not appear to have much point. The current cabinet is set to remain in place only until after the September elections and has itself admitted that it does not have a popular mandate. It is difficult to see what yet another personnel change at this stage would achieve.
Meanwhile, there has been no response to the latest developments from the army council. This is somewhat strange for a body that has issued 66 communiqués to the public since February 17th, and its silence has only fuelled public anger further.
Time for an election
Elections are only two and a half months away at most, based on reassurances from the government and military council that they will go ahead in September. But Egyptians have been left in limbo. The country’s leadership has yet to announce a firm date for the vote, although it has issued an amended electoral law, which was generally ill-received. With no confirmation of an electoral timetable, those in favour of postponing the vote will feel emboldened and are likely to step up their campaign. Meanwhile, those against a delay, mainly nascent Islamist parties, will be growing increasingly anxious. This state of uncertainty, aggravated by the army council’s silence on the subject, will do little to bring about greater political stability. Activists are now calling for a general strike and another “million-person” protest on July 12th.
Retail International®, on behalf of the Richards International Group and its division, Retail Profit Protection Experts, has just released details of a series of ‘Must Read’ books and Advisory Services that are being brought to the MENA region for the first time. Targeted at retailers and shopping centre operators these are aimed at showing key retail executives how to maximise ‘bottom line’ potential and profits.
Richards International Group (‘RIG’) has appointed Retail International® to advise on the launch of its services, books and training programmes to the Middle East & N. Africa. From its UK base the company offers a wide range of specialist services to retail, leisure, entertainment and commercial groups. Earlier this year RIG completed a critical risk assessment for a ‘blue chip’ trading company in Saudi Arabia and has operations in the EU and Africa.
Retail Profit Can Be Increased & Wastage Reduced
From its website “The Profit Experts” the company is publishing a series of seven E-books that amongst others offers retailers “The Latest Cutting Edge Strategies for Increasing Profit and Reducing Wastage”. The books published on Amazon will supplement a series of training programmes and public speaking engagements across the region that are being planned by Group CEO, Romeo Richards.
Mr. Richards an industry guru has advised multi-nationals that include the likes of Tesco, Marks & Spencer, WHSmith, Music Zone, Brantano Footwear, O2 and major shopping malls such as ‘The Chimes’ in West London.
Speaking at the press launch in Manchester UK, Romeo Richards said “We have identified great potential for retailers and mall owners in the MENA region to take advantage of the opportunity for profit improvement from the skills and techniques offered by RIG. I look forward to meeting as many retailers and mall managers as possible during my tour of the Gulf later this year.” Richards added that speaking engagements are being lined up at key Retail Summits commencing in the UAE.
Simon Thomson, Principal of Retail International® and a founder of the Middle East Council of Shopping Centres in Dubai said, “These e-books and programmes from The Profit Experts are timely and long overdue. Retailers everywhere need every tool in the box to drive profits when margins are coming increasingly under pressure. Romeo Richards by bringing his acknowledged experience in such matters to the Gulf is to be applauded”.
The e-books, some of which are free can be obtained from www.theprofitexperts.co.uk
Egypt risk: Alert – Political uncertainty adds to economic woes
May 11th 2011
Printer version
FROM THE ECONOMIST INTELLIGENCE UNIT
SUMMARY
The political turmoil that has accompanied the overthrow on February 11th of Hosni Mubarak, the former president, has had both an immediate and dramatic economic impact, with several indicators down sharply compared with the previous period. Although the overall economic picture is normalising, political uncertainty in the run-up to September’s elections is affecting the business operating environment, as investors hold off investment until the extent and implications of a recent onslaught in legal investigations become clearer.
The worst is over
In the aftermath of the popular protests that brought political change to Egypt after 30 years under Mr Mubarak’s rule, the closure of ports, factories and roads in the early weeks of the year brought industrial output to a standstill.Tourism revenue fell 73.3% year on year in February 2011, with hotel occupancy rates falling to below 10%. Foreign direct investment (FDI) was put on hold and Samir Radwan, the finance minister, has said that FDI in the 2010-11 fiscal year (July-June) is expected to be 40% lower than in the previous year. Overall, the economy contracted by almost 7% in the third quarter (January-March) and economic growth in 2010-11 is forecast to average 3.5%, slowing from 5.1% in 2009-10.
Now, however, industrial production has resumed, travel bans have been lifted and tourists are cautiously returning to the country. Oil and gas output and traffic in the Suez Canal—two of the country’s largest revenue earners—have proved robust even through the worst period of political crisis, and high oil prices will boost hydrocarbons income.
Hazy outlook
Nevertheless, a great deal of political uncertainty persists. The country will not have permanent executive or legislative bodies until after the elections in September, and even then it will only be at the beginning of a long road to redrawing the country’s constitution. Although Egypt’s political revolution may have achieved its main aim—the overturning of Mr Mubarak—there is still much debate as to how much further the process of political exorcism should go. There are those who wish to see every trace of influence of the old regime eradicated from the political system, and every case of corruption investigated. Then there are those who want a return to stability as quickly as possible.
In this context, the economy is likely to continue to suffer. Although the transition government is currently focusing on stabilising the economy, it lacks the legitimacy and time to put in place a new investment strategy, meaning that the country’s economic priorities will remain unclear until September at the earliest.
Frozen direct investment
In the meantime, with the Muslim Brotherhood, a political opposition group, expected to take a significant proportion of the seats in the new parliament, there are fears that the government will move away from the business-friendly policies of the previous regime. International investment is likely to remain on hold as investors assess their operating environment, amidst concerns over restrictions on capital outflow and whether the government’s economic strategy will make room for liberal policies or take on a more populist stance.
This comes despite the 5-day visit by Essam Sharaf, Egypt’s prime minister, to the Gulf at the end of April, where he sought to attract investment to the country. A few days earlier, the Kuwait Investment Authority, a sovereign wealth fund, announced that it had set aside E£1bn (US$170m) to invest in Egypt. However, compared with the US$10bn-US$12bn that Samir Radwan claims the country needs to rebuild its economy, this is just a drop in the ocean.
The climate of uncertainty is exacerbated by ongoing investigations into privatisation deals done by Mr Mubarak’s government with private investors, particularly in the industrial and real estate sectors. Some of the largest companies in the country are implicated, including Palm Hills Development, the second-largest listed real estate company in the country, Sodic, the third-largest, and Ezz Steel.
Under the lens
The investigation into Ezz Steel revolve around its acquisition of state-owned Al-Dekheil Steel in early 2010. Although the company denies that the investigation is affecting it, local press reports claim that National Bank of Egypt (NBE) and Banque Misr have decided to review financing agreements signed with Ezz Steel early last year. The two banks were set to supply the company with a syndicated loan of E£2.2bn over seven years in order to finance future projects.
Palm Hills and Sodic are also under investigation, although both companies deny any wrongdoing. In early April, Palm Hills said that it is considering returning to the government a 183-acre site in Sixth of October city, near Cairo, in an effort to reduce its liabilities and improve its cash flow. The value of Palm Hills shares on the Cairo and Alexandria Stock Exchange fell 59% between January 1st and April 7th.
Broader implications
The exposure of the country’s banks to companies that are either already implicated in the investigations or are potential candidates for investigation means that the financial sector is also affected. In late April, Moody’s, an international ratings agency, revised its outlook for Egypt’s banks downwards from stable to negative, reflecting political uncertainty, risks to asset quality and profitability, and the relatively high exposure of local banks to sovereign debt.
The lack of clarity over how far the government’s investigations are likely to go, or how long they will last, threatens to magnify their economic impact even further. The business environment as a whole in the country could suffer, with banks withholding credit and stock valuations being affected, if investigations extend to every company irrespective of whether it has had direct dealings with Mr Mubarak or not.
Dubai’s economy seems to be gaining momentum once again. But is it a temporary bump due to unrest in other parts of the Middle East or is the recovery on sounder footing? And, can Dubai be great again? Dubai’s economy, which was once the envy of its regional rivals, has struggled since the global financial crisis. But there are many indicators that suggest the emirate’s economy has turned a corner.
While some critics may think Dubai has benefited from a ‘flight to quality’ as funds, tourists and business opportunities fled from Bahrain and Egypt to Dubai, the resugrence seems to be on sounder footing.
There are still many issues to contend with before this bump can transform into a full-blown recovery. The real estate sector and the country’s debt obligation are issues that will be an overhang on the economy, but the country’s unparalleled infrastructure, communciations and transportation, and all-round high quality of living could ensure that the emirate has gotten has gotten ‘over the hump’ and is on its way to recovery. But expect a few nasty surprises along the way, especially if some of the government-related enterprises (GRE) default or the Middle East’s troubles escalate.
IS DUBAI BACK?
Dubai spin doctors have made a career out of telling the world how regional troubles are beneficial for Dubai. Gulf War 1? Think of how Dubai will be the logistics hub. Iraq War? Dubai will be the hub for Iraq-focused companies. Trouble in Iran/Afghanistan/Pakistan/Lebanon? Think of the money that will flow into safe -haven Dubai.
This argument, however, wore thin over the past few years after Dubai saw its economy battered in the aftermath of the global financial crisis. Suddenly, its business model seemed full of holes, its most ambitious company Nakheel, became its biggest embarassment and the real estate went kaput. The spin doctors themselves lost their jobs.
But the Arab Spring is blowing favourable winds Dubai’s way again.
“Dubai, as the region’s safe haven, is benefiting from a flight to quality. This applies to tourism and retail, as well as the financial sector,” says Standard Chartered bank, which thinks Dubai will be one of the “winners” of Middle East turmoil.
The Dubai economy seems to have turned a corner and analysts who have been watching Dubai for years have observed that positive news coming out fo the emirate outnumbered bad news in the first quarter of the year. That is a huge change from the spate of bad news from Nakheel, Dubai World and the wider real estate, tourism, retail and financial market meltdown that had characterised the emirate’s economic fortunes over the past few years.
One Dubai entity that encapsulates all these above mentioned sectors is Dubai Holding Commercial Operating Group (DHCOG, or more simply Dubai Holding). With interests in real estate, tourism and telecom, the conglomerate is a key pillar of the Dubai Government’s economic infrastructure, the entity serves as a great barometre for the Dubai economy and is part of the so-called Dubai Inc.
Dubai Holding‘s revenues increased 43% to AED13.5Bn in 2010, up from AED 9.4Bn in 2009, which it credits to “the handover of completed projects in the built-to-sell portfolio of Dubai Properties Group in communities such as Business Bay, and Dubailand,” apart from growth in telecom and hospitality.
Jumeirah Hotel, which runs Burj Al Arab and Emirates Towers, also saw net profit rise 58%, while operating profits increased by 30%.
“Led by forecasted steady GDP growth rate, global rebound in trade driven by the eastern markets, a strong oil price and stability of the country, we expect to see all our lines of business perform steadily,” said Dubai Holding, which is a vital government-related enterprise, or GRE.
More importantly, it has assured the market it will repay its upcoming bond on maturity, has refinanced a $555 million loan and continues to reduce exposure to non-core assets.
Analysts were watching Dubai Holding closely especially after Dubai World – the emirate’s other major conglomerate – had announced its troubles in late 2008 and defaulted.
“DHCOG was a big worry. After Dubai World, people have been concerned about their debt pile,” Mohammed Ali Yasin, chief investment officer at CAPM Investments in Abu Dhabi, told Reuters. “The fact they were able to refinance their loans and are confident of repaying the bonds supports the fact that a recovery is slowly coming back to Dubai.”
DHCOG has a 250 million Swiss franc-denominated bond due in 2011, and a $500 million bond due next year.
The bailout of the GREs helped push up Dubai’s sovereign debt by almost 20 percent of GDP in 2009, demonstrating the fiscal risks posed by GREs, the IMF states. “Although Dubai regained market access in September 2010, the cost remains elevated, reflecting contingent liabilities from other GREs; rollover needs of $31 billion in 2011-12; and broader concerns about the solvency of restructured GREs if asset values do not recover to enable repayment of the restructured loans at maturity.”
These uncertainties are likely to persist even as the Dubai government develops a strategy to put its GREs on a viable path as refinancing problems could re-emerge when the restructured loans mature after 2014, including those from local banks, warns the IMF.
EGYPT TRAFFIC DIVERTED?
Other parts of the economy also suggest that Dubai is gaining traction. Dubai Airports said its March passenger traffic rose 5.8% year-on-year, making it the fourth busiest airport in the world, although freight volumes fell 3.7%
During the first quarter of 2011, 12.3 million passengers passed through the airport, up 7% from 11.5 million during the first three months of 2010.
“Dubai’s hospitality sector is also performing well, with China emerging as a key market. Airport traffic, a key indicator of visitor levels to the emirate, rose 15% in 2010,” says Standard Chartered Bank.
Tourist reservations for the first nine months of 2010 rose 16% year-on-year to 7-million people. “Tensions in other tourist destinations in the region could also indirectly benefit Dubai’s tourism sector. This is especially the case for intra-regional tourism. Indeed, tourist arrivals from Saudi Arabia rose in January and February 2011, a time of high risk in other parts of the region (this period also coincided with a long public holiday in Saudi Arabia),” the bank said.
Analysts also think that Dubai has also benefitted from the Egypt tourism sector coming to a virtual standstill, as tourism traffic and expatriates and residents fleeing the North African country buoyed Dubai’s tourism sector.
More importantly, the emirate has been paying its bills, which has brought confidence back into the economy. In late March, Emirates airline, another GRE, said it has repaid a US$500 million bond in full on its maturity date and is on track for another record breaking financial year.
“The results for the first half of the 2010-11 financial year are incredibly robust, and reflect Emirates’ success in growing customer demand, supported by investment in new aircraft, products and customer service,” said chairman Sheikh Ahmed bin Saeed Al Maktoum.
Still, as the table below shows, the economy still has some way to go before a full recovery and has significant debt obligations till at least 2020.
A key worry is Dubai Group, which is DHCOG‘s investment arm, but ring-fenced from the rest of the company.
The entity, which has stakes in EFG-Hermes, Taib Bank and Bank Muscat, is currently in discussions with lenders over a $10-billion restructuring, with a resolution expected to be some time away.
Dubai Group To Restructure $10B Debt, Talks May Drag – Sources
WINNER BUT NOT OUTPERFORMER
Citibank estimates that the emirate’s economy grew 3.6% 2010, and is forecast to rise 5% in 2011, jumping to 6% in 2012.
“The UAE may be a net beneficiary of the political turmoil experienced in other parts of the Middle East,” notes Citibank. “Due to its relative political stability, we believe there is a possibility of a diversion of commercial, investor and tourist activity from less stable parts of the region. The external sector thus is the main driver of the recovery, with gains being posted both in export growth, and a reduction in imports. Dubai’s economy, in particular, is showing signs of strong externalled recovery as sectors such as tourism, trade, logistics and transportation respond strongly to the rebound in the global economy and may get a boost from the political instability in regional competitors.”
The IMF has a more conservative forecast and expects the UAE economy to rise 3.3% in 2011 and 3.9% in 2012, which is below regional growth.
“Dubai’s economy is recovering,” says Standard Chartered Bank in a note to clients. “The recovery is based on three pillars: logistics, hospitality and retail. It is also important to highlight that Dubai is seen as the safe haven of the region. Given elevated risks elsewhere, Dubai is benefiting from a flight to quality. This benefits the hospitality and financial sectors. The uncertain situation in Bahrain, which has a banking sector 10 times the size of its economy, could end up benefiting Dubai’s financial centre. There are already signs that funds and companies are fleeing to Dubai from Bahrain.”
Logistics and trade, which makes up 40% of the emirate’s GDP, rose 19% year-on-year in the first ten months of the year. Direct exports rose 36% year-on-year to $15.3-billion, and imports gained 14% to $81.7-billion. Re-exports grew by 22%, reaching $32-billion.
“This pick-up in trade was a significant contributor to economic activity, and it is likely to continue – the government forecasts that non-oil exports may grow 20% in 2011,” says the bank. Tapping new trade opportunities with Africa will help Dubai to maintain its status as a regional trade hub, especially given strengthening trade links between Asia, Africa, the Middle East and Latin America.
REVISITING DFM
Even the UAE stock markets, which have been anaemic and lethargic for the past few years have come back to life.
The table above shows that the Dubai Financial market has a long way to go to retrace its 2008 highs, but that’s exactly what makes it attractive.
“The UAE stock markets are some of the cheapest globally, with the economy hit by debt issues in Dubai and a real estate market under pressure,” notes Rasmala in a note, recommending investing in the UAE stock market.
Dubai risk is coming down (although it still exists) and the Dubai CDS spread has come down from 455bp at the beginning of March to 370bp currently, “suggesting to us the discount rate could come down by up to 1%, thus supporting higher valuations.”
Middle East Sovereign Debtors Seen As Among Riskiest By Global Investors
An MSCI upgrade to emerging market status in June could be a major boost for the UAE’s international reputation, as it will help make the stock markets more attractive to institutional investors, lift trading volumes and lower investors’ risk perception of the exchanges, notes Rasmala.
REAL ESTATE MISERY
Anyone who has spent time in Dubai will know that the emirate will not be content with a meandering growth. So the bigger question is: can Dubai – the great Arab experiment of government-controlled capitalism – be great again?
There are plenty of issues to contend with before Dubai can retain its buzz of 2002-08.
The biggest drag on the emirate’s economy remains its real estate, which continues to be in considerable pain since 2008.
“We believe UAE house prices are likely to decline by an additional 25-30% (nominal terms) after a peak-to-date 45-55% drop largely due to the ’3D’ challenge of depopulation, deleveraging and deliveries, says Rasmala.
“We believe equity valuations largely account for systemic challenges, but in the absence of significant catalysts – including consolidation, privatisation, banking and immigration reforms – we expect the UAE property sector to remain range-bound in the foreseeable future.
The emirate currently has an oversupply of 105,000, according to Al Mal Capital. “Prices and occupancy levels are likely to continue declining until 2013. We expect average prices in Dubai to fall by a further 5% and 4% in 2011 and 2012, respectively. Prices are expected to continue decline in 2013 and bottom-out by the end of 2013.”
Closely linked to the fate of real estate and Dubai’s greater debt issues is the emirate’s local banking sector, which has suffered over the past few years. “We expected a clean-up of the balance sheet in late 2010, and this has been delayed,” says Rasmala. “Nevertheless, a resolution of the big issues – Dubai-related GREs – by 3Q11 looks realistic.”
At the same time, the banking sector has been addressing the issue of its liquidity shortage gradually, with the banking sector as a whole moving into liquidity surplus around the year end. Now, the banks are beginning to ease liquidity constraints, and are moving back to making progress on lending, but Rasmala says lending to the private sector remains limited.
Also read: Dubai Leads List Of World’s Worst Housing Markets
… BUT THE WORST MAY BE OVER
Dubai’s main challenge is leverage, especially given significant maturities in 2011 and 2012. But there are two positives this year compared with 2010 and 2009 argues Standard Chartered.
“First, the housing-market bubble has already burst; growth has turned positive and is gaining momentum. Even if growth remained within the 3-4% range, far below the rate during Dubai’s boom, it is positive and broad-based.”
Second, the uncertainty surrounding restructuring has been reduced, as a plan is now in place. “These are positive developments, but Dubai still faces significant maturities of around $18 billion in 2011, says Standard Chartered.
Most of these are related to loans rather than bonds. This will probably reduce market concerns, but any rollovers or restructuring of bank loans would likely keep credit conditions tight across the UAE, detracting from growth dynamics, the bank notes.
Dubai can also take comfort from is sister emirate Abu Dhabi which has been raking in petrodollars, thanks to high oil prices. Any shortfall or risk that Dubai economy may well see Abu Dhabi intervening once again to bail out the emirate, just like it did in 2009 with a $10-billion loan. We fully expect Abu Dhabi Government to intervene once again and ensure Dubai’s financial needs are met.
Abu Dhabi is an oasis in a troubled desert
This belief is further strengthened as the Abu Dhabi Government will be keen to avoid any public backlash that has derailed the economies of other Middle East nations. Indeed, the UAE (read Abu Dhabi) has participated in a $20-billion GCC development fund for its neighbours Oman and Bahrain, and it is reasonable to expect Abu Dhabi will not leave Dubai in the lurch either.
We also expect that some of the $100-billion plus spending announced by Saudi Arabia government to spill over into the Dubai economy.
A recent Saudi Banque Fransi notes that the Saudi economy has already felt the positive impact of the government’s massive pay rises and payouts to its citizens.
Government bonus payout has spurred 13.8% jump in annual money supply and 13.3% rise in deposits in March, while consumer indicators point to rise in private consumption, and point-of-sale transactions jump 22.6% and cheques surge 29% from February levels, says Banque Saudi Fransi.
We expect many Dubai companies, or companies based in Dubai but focused on Saudi Arabia, to benefit from this major investment spree that will be rolled out over the next few years.
Saudi Arabia’s Boom Is Here To Stay
Bahrain’s troubles also give Dubai’s financial sector some momentum especially as Manama’s reputation has greatly suffered over the past few months.
However, one key cloud hovering in the distance is the Iranian-GCC confrontation and a proxy war that is playing out in Bahrain. Any escalation of that conflict could hurt investor sentiment and delay economic recovery even in safe-haven UAE.
CONCLUSION
Dubai has historically benefited from misfortunes in other countries in the region. “It seems this year has not been different, and the current unrest sweeping around the region provides Dubai with a period of opportunity,” says Rasmala. “But as we see this as a short term phenomenon; there will be a need for political stability and investor confidence in the region to make this sustainable for the longer term.”
While challenges remain, alifarabia.com believes the Dubai economy is on a much sounder footing especially as much of the excesses and speculative elements of the economy have been weeded out. What Dubai is now left with is an unparalleled logistics, commercial, retail, communications and transportation infrastructure in the region – and ready for business in a region that is sitting in a fresh pile of cash thanks to high oil prices.$1-Trillion Of Oil Revenues May Be Looking To Buy Assets Next Year: MS
Seems like the stars are aligning for Dubai once again.
© alifarabia.com 2011
Exclusive research has identified the largest outlet-center portfolios around the globe (those with more than one center, totaling over 1 million sf):
1. Simon Property Group, Global, 87 centers, 39.8 million sf
2. Tanger Factory Outlet Centers, U.S., 34 centers, 10.5 million sf
3. McArthurGlen Development, Europe, 19 centers, 4.7 million sf
4. Craig Realty Group, U.S., 10 centers, 3 million sf
5. Neinver, Europe, 11 centers, 2.4 million sf
6. Value Retail, Europe, 9 centers, 1.8 million sf
7. Fashion House Group, Europe, 9 centers, 1.7 million sf
8. Horizon Group Properties, U.S., 5 centers, 1.5 million sf
9. Fashion District, Italy, 3 centers, 1.3 million sf
10. Freeport, Europe, 3 centers, 1.2 million sf
11. AWE Talisman, U.S., 3 centers, 1 million sf
Source: Value Retail News
USA retail: The space race
April 19th 2011
FROM THE ECONOMIST INTELLIGENCE UNIT
US retail is recovering as the big store groups start to expand again. With the window to snap up store space closing, European retailers could be missing a rare opportunity.
The US has officially been out of recession for some time but while consumer spending powered the industry through previous downturns, this time round the country’s consumers have taken longer to be inspired by any feel-good factor. Unemployment is falling, yet the fall-out from the housing market is still keeping consumers out of the shops. That disconnect was starkly illustrated earlier this month when the national vacancy rate for large US malls in the first quarter of 2011 hit its highest rate in over a decade, with shuttered department stores and other anchors turning off shoppers. According to a report by commercial real estate research firm Reis, the vacancy rate reached 9.1% in the first three months of the year, up from 8.7% in the fourth quarter of 2010. It was the highest vacancy rate since Reis began tracking the market in 1999. Vacancy rates have risen at a time when new shopping centre development has all but stalled. Instead of building new malls, investors have focused on remodelling and completing projects that were already underway. Mike Kercheval, president of shopping centre industry body the ICSC, predicts that 2011 and 2012 will see new space provision in the US fall again, beating 2009’s record low. Even so, demand has not kept up and empty store numbers are still increasing. This should provide a welcome opportunity for EU retailers. The US market has long proved a difficult country for them to conquer, in no small part because of the scale required to create a regional let alone national presence. So while TopShop (UK), H&M (Sweden), Zara (Spain) and Uniqlo (Japan) may have swanky Manhattan flagship stores, they have yet to become significant cross-country players. Fashion retailer Zara still has only 49 stores, H&M 209 stores and Spanish retailer Mango, which started in Los Angeles, around a dozen. Indeed, in the National Retail Federation’s annual listing of the top 100 “hot retailers” operating in the US, just four came from Europe: Tesco of the UK (which was ranked second with its Fresh & Easy concept), Germany’s Aldi, Ahold of the Netherlands (through its ownership of US grocery operators) and Sweden’s IKEA. Historically, the US has proven a graveyard for a number of European players – UK retailers Sainsbury’s and Marks & Spencer being two who had to pull out. But there can surely have never been a better time to launch an assault on the US than the past two years. Missing the boat The ICSC’s Mr Kercheval certainly argues that: “If you are a European retailer looking to get into the US then you need to hightail it over now and find some good deals because this may be your one opportunity to break into the US market. The developers want you and you can probably afford it.” Yet despite such arguments, so far most European retailers seem to be holding back. Mr Kercheval notes that instead it is American discount chains and value fashion retailers such as Forever 21 that are snapping up new locations, taking advantage of great deals on prime locations. Forever 21 has taken up several former department store anchors within shopping malls and could add as many as 50 stores this year. Meanwhile, 7-Eleven, 99 Cents, Bottom Dollar Food, Dollar General and Family Dollar are all scheduled for significant store growth. The only European retailer that is pushing ahead appears to be Tesco. Its launch of Fresh & Easy in November 2007 has not been without problems: the UK retailer had hoped to open as many as 250 locations within its first year but still has only 170. The company is reportedly losing about US$1.5m per store, in part because its infrastructure was scaled to suit a bigger operation. But with further openings planned, the company is hoping to break even by 2013. For those wishing to follow Tesco, the chance to get a good deal may soon start to slip away. Though malls are still empty, that is partly because of legacy issues such as the bankruptcy of America’s second-biggest bookstore chain Borders and scaling back by Macy’s, the second largest department store group. As these issues start to wash themselves out of the system, vacancy rates should start to fall sometime later this year or early 2012, as the lack of new retail space starts to have an impact. Already, the average price of retail real estate is rising again from its slump in early 2010, according to the MIT Center for Real Estate (see chart). Whether that rebound continues depends on what happens to retail sales growth, which the Economist Intelligence Unit expects to remain at under 2% a year for the next four years at least. Even so, it seems unlikely that store prices can remain as cheap as they are for long, for those with the money and courage to take a chance on expansion.
Source: The Economist
Souks face increasing competition from supermarkets as private firms – both domestic and foreign – plan openings and expansions in Morocco , changing the nature of the marketplace, Global Arab Network reports according to OBG.
The supermarket segment is currently dominated by local players, but foreign firms are showing increasing interest and appear set to help drive expansion. In March Turkish no-frills low-cost supermarket chain BIM announced plans to almost double the size of its existing store network in Morocco, from the current 45 to 80. It reportedly has plans to further expand to 150 stores by the end of 2012. The discount retailer entered Morocco in 2008 and all of its current stores are located in Casablanca and the surrounding areas, meaning there is ample room for the company to expand in Morocco.
Low-cost chains such as BIM, which sell discounted bulk items, are well-placed to succeed in Morocco, where 51% of people buy groceries in large quantities to save money, according to a survey published by Moroccan business news weekly La Vie Eco in January.
BIM’s expansion plans would make it one of the largest players in the country in terms of outlets, though, given the size of its stores, not in terms of total floor space. Other major companies in the sector include the locally owned Hanouty group, which runs a chain of convenience stores, and Marjane Holding, which is currently the largest player in the supermarket segment in terms of both outlets and floor space with a network of 52 stores.
Marjane’s stores include its 21 own-brand hypermarkets located on the outskirts of urban areas, which have a combined floor space of around 140,000 sq metres and currently dominate the hypermarket segment, as well as its 31 Acima supermarkets, a chain of smaller stores usually found in town centres. While local conglomerate ONA-SNI currently has a 100% stake in Marjane Holding, it reportedly intends to reduce its interest in the firm later this year as part of plans to lower its ownership levels in some of its subsidiaries.
While there is growing foreign interest in Moroccan mass retail, local companies are also increasing their clout in the sector. In November last year, locally owned supermarket chain Label’Vie acquired the local outlets of the Metro wholesale chain from Germany’s Metro Cash and Carry. Label’Vie, in addition to operating a chain of 18 stores under its own name, also operates two Carrefour-branded hypermarkets under a franchise agreement with the French retail major. The company plans to transform its newly acquired Metro stores into Carrefour-branded hypermarkets over the course of the coming two years, rebranding four this year and the remaining four in 2012.
Locally owned Aswak Assalam is another of Marjane’s competitors that is expanding its supermarket and hypermarket network. The chain, which is owned by Ynna Holding currently operates 11 outlets across the country and intends to open an average of two additional stores a year.
In September it announced plans to invest Dh270m (€24.6m) in the construction of a combined hypermarket and shopping mall complex at site of the former Casablanca wholesale market, which will be known as Aswak Assalam Belvedere. The project will include a 5000-sq-metre branch of Aswak Assalam as well as a 5500-sq-metre shopping centre, spread over three floors and including restaurants and a bowling alley. The complex is due to open later this year. Meanwhile the aforementioned Hanouty, largely active in the convenience store segment, has plans to increase its supermarket presence and has already opened a 700-sq-metre facility in Marrakech.
Outside of supermarkets and hypermarkets, foreign firms – many of them French – are displaying increasing interest in opening branches and franchises in the country. For example, Galeries Lafayette is due to open a 10,000-sq-metre facility, its first in Morocco, at the Morocco Mall on Casablanca’s corniche. Fnac, the French electronics, book and audio-visual retailer, will also have an outlet there. The mall was due to open earlier this year but its inauguration has been postponed until September.
In February 2011, French home improvement chain Mr Bricolage opened its third store in Morocco, a 2800-sq-metre outlet in Tangier located adjacent to an existing Marjane hypermarket. The firm already has branches in Casablanca and Marrakech and also plans to open a fourth store in Agadir. Moroccan investors are also planning to open franchises of French organic and health food store La Vie Claire, with the first due to open in March in the California district of Casablanca and plans for two more stores in Rabat and Casablanca further down the line.
The government is supporting the pursuit of large-scale shopping facilities. The Rawaj plan, launched in 2008, aims to treble large-scale retail capacity by 2020. Some 56 large-scale retail outlets are due to open by 2012 alone, with the country boasting 600 such facilities by 2020.
While most Moroccans still head to traditional souks, markets and smaller neighbourhood stores to shop, the expansion of large-scale, modern retail outlets will likely result in a gradual change in habits in the years to come. With backing from the government in the form of the Rawaj plan and growing investment from both local and foreign players alike, the country’s shoppers look set to benefit from lower prices and greater choice on store shelves.
Global Arab Network
This article is published in partnership with Oxford Business Group
