Not all cities offer the same level of variety or access to big brands, however. A recent market research report has found Dubai to be the top shopping destination for international retailer presence.
Dubai had 62% of international retailers doing business in the city in 2017 according to CBRE Group’s “How Global is the Business of Retail?” 2018 report. Shanghai was second with 55.3%, while London – which came top in CBRE’s 2017 report – came third with 51.7%. New York, the top US city, ranked eighth with 46.3%.
The report by the commercial real estate services and investment company analyzed the retail sector in 123 major cities in 47 countries, using a sample of 334 global retailers. CBRE notes that its 2018 report was based on brand analysis conducted every other year. Rankings in its 2017 report were estimates, meaning not only has London dropped from the top spot this year, but its ranking for the previous year has been downgraded too.
“(The brand sample) is not focused on any one particular market or any one particular region,” explains Natasha Patel, director of global retail research at CBRE, “it’s trying to be as representative as possible of the global retail market space.”
While Dubai has risen to the top in terms of international retailer presence, for the third year in a row Hong Kong topped the list when it came to markets with the largest number of new entrants, attracting 86 new international brands in 2017 to Dubai’s 59 and London’s 49.
No US city made the top 20 in this metric on account of its mature retail market, while half of the top 20 cities were located in Asia. That said, the US has the largest consumer market in the world per CBRE, and remains the largest exporter of retail brands according to the survey sample.
Retailers look towards experience-oriented shopping
The retail landscape is a mixed one for brands, the report noting a 2.9% decline in physical store expansion by brands entering new markets since 2016.
Online shopping has disrupted retail, provoking brands to expand more strategically and shopping centers to adapt their offerings. That said, the report argues having a physical store network remains “critical to success,” noting a number of online-only brands have begun opening traditional brick-and-mortar stores.
“We’re seeing landlords now starting to really diversify their tenant mix towards more experience-orientated brands,” says Patel. “Food and beverage represents a huge part of that.”
Patel says the report showed food and coffee retailers were “the most aggressive expanders. They accounted for 25% of overall new entrant activity in 2017, up from 17% in 2016.” This increase was largely buoyed by growth in the Asia-Pacific region.
Meanwhile, luxury and business fashion witnessed growth in the Americas, and mid-range fashion was the largest area for new market entries in Europe, the Middle East and Africa.
Dubai’s rise in the retail world
In recent years Dubai has risen to become an attractive international shopping destination. Value added tax (VAT) on goods and services was only introduced on January 1, 2018 – at a relatively low rate of 5% – although in April authorities approved a VAT refund scheme for tourists.
Dubai’s new status came with a few caveats, however. The report notes that while supply had expanded, there had been “a general softening of market conditions over the past 24 months.”
Nikola Kosutic, senior research manager at market research group Euromonitor International says that “retailers’ profit is being a little squeezed,” but adds that “retailers simply want to be (in Dubai).”
He says in terms of international brand presence, Euromonitor’s data shows similar trends to CBRE’s when it comes to the UAE as a whole.
“There’s a long waiting list for all of the key malls in the country,” Kosutic continues. “We have a large number of new malls being opened this year, next year, so the real estate supply pipeline keeps on being strong.”
CBRE estimates Dubai could add more than 1.5 million square meters (16 million square feet) of new retail space in just the next three years – an expansion of approximately 50%.