Middle East markets are benefiting from the ongoing global economic instability as international retailers target economies with the best growth prospects and those least likely to be affected by austerity measures, said a report.

The 2011 edition of How Global is the Business of Retail? by leading global real estate adviser CB Richard Ellis (CBRE) mapped the global footprint of 323 of the world’s top retailers across 73 countries to identify trends in global retail expansion at national and local level.

The report found that Middle East markets are attracting an increasing number of international retailers and are competing with established global retail centres, with Dubai climbing CBRE’s rankings to share the top position with London as the most targeted retail destination.

Kuwait City and Riyadh also maintained key positions in the top 20 ahead of many established destinations.

The UAE placed second to the UK as the most highly penetrated global market, attracting 54 per cent of all international retail brands surveyed.

The UK maintained its position as the world’s most international retail market for the fourth year running with 58 per cent, while the US made up the final position in the top three with 50 per cent.

Other Middle East countries fairing well in the study were Saudi Arabia (11), Kuwait (14), Bahrain (29), and Qatar (30).

Attracting more than half (56 per cent) of all international retail brands surveyed, Dubai now equals London as the most popular retail city in the world.

With 1.2 million sq m of retail space having come on to the market since 2006, a wealthy consumer base, and very little competition from local retailers, Dubai’s stature as a key destination for international retailers has grown quickly, the report said.

A further trend has been an influx of US-based retailers in the last 18 months.

Traditionally US retailers have been reluctant to adopt the retail franchise model that is commonly used in the Middle East; however, with limited opportunities for growth in their own markets, more retailers have taken the plunge and made inroads into the region, typically using Dubai as a springboard into the region’s other markets, according to the report.

“Historically, Dubai has been the entry city to the Middle East, but now retailers are looking to replicate their success in other Middle Eastern countries with a similar consumer base,” said Michael Leighton, senior retail consultant, CBRE Middle East.

“Essentially this means a wealthy, well educated, and well traveled population with a high propensity to use modern shopping malls.”

“Kuwait and Saudi Arabia fit the bill, as does Abu Dhabi where two new shopping centre openings are likely to make it a bigger destination for new entrants than Dubai next year. The recent unrest in the Middle East cannot be ignored, but it is unlikely that this will have any long-term impact on retailers’ desires to expand into the region,” he added.

Dubai and London are followed in the top retail city rankings by the established markets of New York (44.3 per cent of international retailers), Paris (43.6 per cent), and Hong Kong (40.6 per cent), which clearly still hold considerable global pulling power.

The composition of the rest of the top 20 comprises a mix of traditional and emerging markets, providing an indication of how global the international retail business really is.
International expansion remains a key strategy for retailers throughout the world, with 40 per cent of new openings occurring outside the retailer’s home region.

Even though the pace of expansion has slowed, with the overall footprint increasing by 2 per cent compared with 4 per cent in 2009 and 12 per cent in 2008, some 21 countries saw five or more new retailer entrants last year.

Peter Gold, head of EMEA Cross Border Retail, CB Richard Ellis, said: “Although the pace of growth slowed in 2010, retailers continue to grow their store networks in a wide range of international markets, targeting both mature and emerging countries.”

“While it is clear that the globalisation process is ongoing, two factors will limit the rate at which retailers expand in coming years. Firstly, a limited pipeline of new space in many markets will restrict access to prime retail locations, and as a result, more retailers may look to grow their business via online platforms rather than expanding their physical store network,” he added.

The Middle East continues to be a major target for international retailers. Following the large number of new entrants in 2009, the UAE fell back slightly in 2010 in terms of new store openings; however, this is relative to the high proportion of retailers already present in Dubai and retailers remain active in the region, with Kuwait (six new entrants) and Saudi Arabia (five) proving popular.

Gold continued: “Retailers are increasingly looking at markets where GDP has held up relatively well and where consumer spending is unlikely to be squeezed by austerity measures that have mostly affected Western European and North American consumers.”

“Retailers from more mature markets are looking to emerging markets for new growth, as the scope to expand and generate strong returns in their domestic markets diminishes,” he concluded.

Dubai is the top target for Asian retailers targeting markets outside their home region (22.9 per cent) and is second only to London as the top target for American retailers, with 62.7 per cent of those businesses surveyed present.

These are the only two cities (outside of Asia) where more than 10 per cent of Asian retailers have a presence, which reflects the fact that most Asian retailers have yet to leave their own region, the report noted. – TradeArabia News Service