The biggest challenge staring at the retail sector in Makkah, Saudi Arabia, is the combination of the shortage of large and suitable land plots for mall developments and the high land prices relative to other cities in the kingdom, according to Colliers International, a global leader in commercial real estate services.

Retail demand in Makkah is generated from two distinct segments; the city’s residents and the Hajj and Umrah pilgrims. These have shaped the retail landscape in the city with shopping centres that mainly cater to pilgrims and retail centres serving the residents located to the north of the city closer to the residential areas, stated Colliers in the latest white paper on the retail sector in Makkah.

The research highlights the changes in the structure of the retail landscape by looking at supply and demand dynamics, potential opportunities and the challenges facing the sector cumulating with an outlook of the sector’s performance.

With Makkah’s supply significantly lower than other cities in the kingdom, the paper sheds light on this anomaly due to a lower mall density despite the city’s large population base and the international pilgrim’s visitations.

"High infrastructure cost and the city’s residents’ preference towards shopping in Jeddah have limited the development of new shopping centres," remarked Imad Damrah, the managing director, Colliers International in Saudi Arabia.

"With the execution of several strategic infrastructure and transportation projects, along with the vision 2030, capacity is expected to rise substantially, translating into significant growth in the numbers of visitors/pilgrims. This will fuel the city’s local economy resulting in an increase in consumption, retail sales and demand for new retail projects," he added.

Ian Albert, the regional director and head of research and advisory, Colliers International Mena, said: "Alongside recent government emphasis on promoting the kingdom as a leisure and entertainment destination, more space should be dedicated to distinctive family-oriented entertainment themes."

"F&B outlets are essential to differentiate those new shopping experiences from the existing traditional centres and to compete with Jeddah," added Albert.-TradeArabia News Service