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Riyadh retail market surges over 11pc in 5 years

RIYADH, July 4, 2019

The retail market in Riyadh, Saudi Arabia has escalated at a CAGR of 11.1% from 2013 to 2018 owing to government implementing several key initiatives such as allowance of 100% FDI in retail sector and lifting ban from cinemas, a report said.

The demand has although declined from last year primarily due to implementation of VAT by the government, said the report titled “Riyadh Retail Market Outlook to 2023 - Dominance of Online Shopping and Emergence of International Brands to Fuel Demand” from Ken Research.

There has been oversupply in terms of retail units within the country due to a deceleration in economic growth triggered by the fall in oil prices. In future, with implementation of Saudization policy by the government, increase in number of cinemas and other factors, it is anticipated that the supply-demand gap will decline in the retail market in Riyadh.

Factors influencing the sector of retailing in Riyadh

Lifting ban from cinemas in Saudi Arabia has opened doors for investment in the entertainment sector, thus reflecting a great potential in the demand for retail sector in Riyadh city. Central region was observed as the most attractive area for establishment of retail projects owing to quality infrastructure, financial districts, high population and better connectivity with other regions.

Some of the other major factors influencing Riyadh retail market include increase in retail spending, implementation of VAT, tourism, population and demographics, rising disposable income, emerging supermarkets and hypermarkets, entrance of international brands, relaxation of investment regulation, tenant mix and climate conditions.

Market insight and performance

After witnessing a growth for the last four years, the demand for retail space in Riyadh witnessed a decline in the year 2018 owing primarily to introduction of VAT coupled with other factors such as rising e-commerce retail.

Among different mall categories, super-regional malls had the highest occupancy rate in 2018, followed by regional malls and community centers. Average rentals rates have also declined over the last year reflecting the decline in demand. With new reforms kicking in, the retail market will witness a surge in the near future.

Competition analysis of retails in Riyadh

Over the past few years, the landscape of Riyadh’s retail sector has transformed from a conventional market place comprising unorganized independent stores and shops to organized large-scale shopping malls and hypermarkets that house the largest global brands. The retail sector in Riyadh is now highly competitive.

Given the fragmented nature of Riyadh’s retail sector and rising popularity of organized retail, consolidation is likely with larger players growing inorganically to capture market share. These players keep innovating on strategies like product differentiation, price-related offers along with placing the mall distinctively in the minds of patrons through various entertainment packages like amusement parks and food courts.

Future outlook and development trends

Despite facing difficulties over the past years, the retail market in Saudi Arabia is expected to maintain an overall positive outlook due to multiple reforms that are being presently planned and executed by the Saudi Arabian government. The most prominent of these reforms include allowance of 100.0% FDI in retail sector, lifting of ban from cinemas and implementation of Saudization.

These reforms over the long term aim at overcoming the multiple obstacles that are being faced by the retail sector such as the decline in the rental rates and the oversupply situation. Emergence of international brands has been gaining popularity in the retail market.

Some of the key expected upcoming retail projects in the Saudi Arabia include Cordoba Boulevard, Al Diriyah Festival City Mall, City Center Ishbiliyah, and Mall of Saudi, according to the report. – TradeArabia News Service




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