In terms of retail floor space, the Gross Leasable Area (GLA) has been growing steadily over the past few years and is today estimated at more than 6.5 million square metres, up from one million square metres in the mid-90s, according to Global. The growth of the retail sector in the GCC has attracted multinational companies to the region. Carrefour, the world’s second largest retailer after Wal-Mart, has a good presence across the GCC.
Carrefour has entered into a joint venture with Majid Al Futtaim Holding (a Dubai-based company) to form MAF Hypermarkets, which operates close to 20 hypermarkets across five countries (except Bahrain) in the GCC. Encouraged by the performance of its retail stores, Carrefour has already planned to open new stores in the region — four in Saudi Arabia and one in Bahrain.
Géant Hypermarkets, which is part of Groupe Casino of France, operates around seven stores across Saudi Arabia, UAE and Bahrain. Leading regional retail players in the region include The Sultan Center (TSC), LuLu and Panda. TSC, which has good presence in Kuwait, Oman and Jordan, is planning to expand into Bahrain and Qatar by the end of 2008. The company has plans to open a number of other stores in Kuwait in the coming years.
LuLu, which is part of the UAE-based EMKE Group, operates more than 50 hypermarkets in the region. LuLu plans to open more than 10 stores in the region by the end of 2008. Panda, which is part of the Saudi-based Savola Group, operates around 60 stores in Saudi Arabia. It has also expanded into the UAE. The population growth of the GCC countries has also contributed significantly to the growth of the retail sector in the region. GCC countries have experienced higher economic growth in recent years thanks to high oil prices. The nominal GDP of GCC countries grew at more than 15 per cent during 2006. This economic growth has resulted in more employment opportunities and the consequent influx of expatriates.
The population of the GCC grew by more than 3 per cent during 2006, higher than other regions. This increase is fuelling the growth of the retail sector in the region, the report said. The demographic profile of the region is also very favourable to the retail sector, says Global. A combination of a young, growing and affluent population has provided the required stimulus to the sector in the region.
The economic growth has resulted in more money in the hands of people and an increasing marginal propensity to consume, which are proving beneficial for the sector. The per capita income in the GCC region was close to $ 19,000 in 2006. “We believe the growth of the retail sector will remain strong in the medium term, given the growth in the economies. According to A T Kearney’s Global Retail Development Index 2007 for emerging markets, UAE and Saudi Arabia are ranked 16th and 17th respectively.
The index takes into consideration factors like country risk, market attractiveness, market saturation and time pressure, and so on. UAE continues to invest in large shopping malls and is able to attract most of the big names in the international retail arena to set up shops there. Saudi Arabia’s entry into WTO has positioned itself favourably in the retail sector. Other countries like Kuwait, which does not attract a large tourist population, is benefiting from local spending which is considered to be very high,” Global stated.
According to market estimates, the total GLA of the GCC retail industry is expected to reach around 10 million square metres, up from 6.5 million square metres today, which translates to a CAGR of more than 15 per cent. Based on the projects under construction, UAE and Saudi Arabia are expected to contribute maximum to this growth.
“With its growth potential, we believe the region will continue to attract multinational companies. As the fortunes of the retail business have a high degree of correlation with broad macro-economic factors, such as per capita income levels and population growth, any slowdown in the economic growth in the region will have an adverse impact on the sector. However we do not foresee a major slowdown in the GCC economies in the short to medium term,” Global said.
