DUBAI (Reuters) - Dubai’s mall shops are set for tougher times and even closure if landlords continue to stall on renegotiating high rents, the managing partner of Dubai-based Rivoli Group said on Tuesday.
Ramesh Prabhakar told the Reuters Global Luxury Summit in Dubai it would be clearer by the end of the year how retailers react after the traditionally quiet summer months and Islam’s holy month of Ramadan, which ends around September 20.
“If we don’t talk and come to the table there will be collateral damage,” Prabhakar said. “If it remains at this level of business for the rest of the year ... you will see some burnout.”
Rivoli is among retailers which expanded rapidly as Dubai’s economy boomed in recent years as high oil prices supported strong regional growth rates and helped cement the emirate’s position as a regional trade and tourism hub.
Dubai, a member of the United Arab Emirates, has built itself up as a regional fashion capital, boasting more than 40 malls, including one that features an indoor ski slope, another themed on the travels of a famous Middle Eastern geographer and one described as the world’s largest.
Like real estate and commercial property, retail rents soared as shopowners flocked to secure space in malls, but unlike real estate, shopping developers have been reluctant to reduce prices hoping to ride the worst of the financial crisis.
“The penny has not dropped yet and everyone is aware of the consequences,” Prabhakar said.
A reasonable figure for rental costs as a percentage of the topline figure was between 8 to 11 percent, but anything more would be “difficult,” Prabhakar said.
“The majority are talking, the minority are not, but it’s the minority we need to talk.”
(For summit blog: summitnotebook.reuters.com/)
Editing by Inal Ersan and Rupert Winchester