How Much Retail is too Much?
Part of my role heading up the Middle East Council of Shopping Centres (MECSC) is answering questions from our members and the general public. One of these questions which is asked frequently is ‘how much retail is too much?’
Let’s begin by studying other western markets and then focus on the GCC retail scene.
Michael Lewis and Michael Dart in their new book on retail titled The New Rules of Retail, Second Edition outline some eye opening statistics for retail in the USA. Also our parent organization the International Council of Shopping Centers (ICSC) have plenty of statistics regarding shopping centres and retail in general in the USA.
According to the ICSC in the USA, in 2013 there was 7.5 billion square feet of retail, in metric measure approximately 700 million square metres, of retail shopping centres in the USA of shopping centres above 50,000 square feet. These numbers have doubled since 1980. On a per person basis that equates to 20 square feet of retail shopping centre space exists for every man, woman and child in the USA. Population grows at approximately 1% per year in the USA. Retail shops and shopping centres in the USA have grown much more quickly than the growth of the population. One of the key reasons for the massive growth in retail shopping environments in the USA is the rise of the big box retailers such as Walmart, Price Club, Costco and others.
The next closest country to the USA with retail space available is the United Kingdom with only 3 square feet of retail available per capita. France and Brazil have 2 square feet of retail per capita and Germany has 1 square foot of retail per capita.
When measuring the total square feet of retail in the USA including all retail shopping centres, all street front retail, all power centres, all big box retailers, the area of retail grows to approximately 22 billion square feet or approximately 68 square feet per every man, woman and child. Clearly the total retail inventory of buildings available for retail in the USA is staggering. One of the key reasons for the massive growth in retail shopping environments in the USA is the rise of the big box retailers also known as ‘mass merchants’ such as Walmart, Home Depot, Price Club, Costco and others. These retailers occupy warehouse sized outlets of large format.
The US retail market is oversaturated now with too retail environments.
In 2014 the total retail sales from all the retail in the USA reached an estimated $4.7 trillion. With an annual GDP of nearly $18 trillion in the USA, retail accounts for approximately 25% of the USA’s GDP. The retail industry is a big business in the USA.
When examining the annual retail sales of the largest retailer in the USA, Walmart’s sales in 2015 exceeded $485 billion. Putting these numbers into context, Walmart’s annual sales are in the range of or exceed the GDP of countries such as Argentina, Poland, Nigeria, Taiwan or Sweden.
In the UAE the total area of retail shopping centres over 50,000 square feet is approximately 80 million square feet. Retail area in the UAE is about 10 square feet per man, woman and child. The UAE has about one half of the retail area of the USA on a per capita basis. Sales per square foot in the UAE are on average some of the highest in the world. Mall of the Emirates was ranked by the ICSC as one of the top ten shopping centres globally with some of the highest sales productivity measured at that time.
Gross sales for retail in the UAE in 2015 reached approximately $44 billion and these sales are estimated to rise to $55+ billion by 2020.
Tourism plays a very important role in the retail business in the UAE. Tourism is estimated to contribute in the range of 30% to 40 % of the gross annual sales of many retailers.
Combining the contribution of the aviation industry with the retail industry in the UAE the economic diversification from oil now provides approximately 50% of the GDP annually to the local economy in non-oil related revenues.
Whereas the US retail market now is officially determined to be overdeveloped relative to other markets, the UAE has less than half the physical retail space per capita than the US. As tourism and Expo 2020 approach with expected tourism numbers to reach 20 million visitors, room exists for at least one more super regional shopping centre in both Dubai and Abu Dhabi.
By David Macadam