Housing and retail: Finding the right mix
How retail is changing the way developers build residential projects

The link between residential and commercial space has been a recurring theme in real estate developments across the UAE. Creating the right mix has been a key challenge for developers, especially when integrating retail with residential schemes. Retail has certainly emerged as a vital component of any development and in many cases has helped increase the marketability of a building or community. Dubai real estate developers are accordingly getting more precise in targeting specific buyer segments and tenants, aiming to cultivate a self-sustaining community with a vibrant retail centre at its core.

“With the Dubai residential market becoming more competitive, developers have recognised the need to differentiate their projects from others,” says Craig Plumb, head of research at JLL Middle East and North Africa. “Including a range of support services is a long-established means of doing this; while this is not a new trend by any means, its use is definitely increasing. Also, the trend for these units to be leased rather than sold is rising.”

Sanjay Chimnani, managing director of Raine & Horne Dubai, notes that most developers are retaining retail components for long-term lease. “The retail units are doing well in the market, based on the supply of the units and the occupancy of the building,” says Chimnani. “There is good demand for these across Dubai and developers look for the right mix of tenants that will enhance the value of their building, as well as those businesses that would be good long-term tenants.”

By leasing the retail component of a development, the developer keeps reasonable control of the services offered to the community. “Some developers have sold their retails to individual owners; these developers are not over selective as to whom they sell to but they are very particular with concept approvals in order ensure the retails add value to the community and in line with municipality standards,” says Sandrine Loureiro, operations manager of Rocky Real Estate.

Retail strategy

Getting retail units occupied is just one part of the challenge; driving footfall into these shops is another important task that keeps developers busy. Some devise longer hours, while others go for a much broader mix of offerings.

“Longer hours are important; this would mean extra sales that define a successful retail precinct,” says Chimnani. “The master developer has to identify, plan and tap the right retail mix to keep their retailer’s cash register ringing throughout the day, especially after the sun goes down. The evening is the hardest time to keep businesses open, and that’s when people have time to shop. Therefore, it will take a healthy dose of imagination and hard work to achieve the mix of stores, coordinated hours and create an environment where people are enticed to go out after dark. An excellent example of this is JBR’s retail precinct, and another good one is that of Downtown Dubai.”

Saeed Al Qatami, CEO of Deyaar, points out that sales strategies differ from developer to developer and matures over a period based on the availability of retail in the vicinity. “Deyaar has evolved and, as a strategy, currently does not offer the retail units for sale,” says Al Qatami. “Retail units are leased out to selective tenants that set up shop in the development. A good mix of retail tenants acts as a crowd-puller and enhances the visibility of the project, thereby adding value to the development.”

To maximise returns, creative solutions must be balanced with economic feasibility. “As such, design strategy should be shaped with multiple audiences in mind, with the value measured using a triple bottomline approach that considers economic, social and environmental factors,” says Al Qatami.

Comfort component

Residents and homeowners often view the retail units as a value-added feature of the property and, hence, are more likely to pay higher rates. “Residents value the convenience, variety and ease of going downstairs for items they need, versus having to leave the building for these same items,” says Al Qatami. “Retail complements the overall development and acts as a community centre, providing people space and opportunity to socialise at the same time.

“Additionally, many retail tenants become destinations themselves due to unique concepts, which add value to the building, keeping it presentable and aesthetically appealing, and also affect their business. In both ways, adding retail units in a development definitely benefits the property.”

Right mix

Striking a balance between well-known brands and local favourites takes flexibility, insight and big thinking, says Al Qatami. “High-street retail and local markets have become increasingly popular because they offer a unique array of retailers and a richer, more authentic urban living experience,” he says. “Finding the right retail mix and offering a varied selection is vital in a competitive market.

“In addition to diverse retail offerings, developers can look for other revenue streams, including sponsorships and community service pop-ups, that increase dwell time and, more importantly, invest in the community’s social fabric. Developers need partners that can help them reduce the risk of their investments and offer customers, retailers and consumers, new and unique experiences.”

Farhad Azizi, CEO of Azizi Developments, says gauging the needs of residents is essential because arriving at the right combination of retail units that complement the lifestyle of residents and addresses their needs is of utmost importance for developers. “Residents may want a quick service restaurant, a grocery store, a salon or all of these close to where they live,” he says. “Azizi Riviera is one such project where we are striving to provide residents all they need and want without leaving the complex. Apart from a mega integrated retail district, there are stores on the ground level of buildings as well. The neighbourhood of a property and the lifestyle it promotes form a big part of any property’s appeal.”

Value for investors

Arthur & Hardman, the development arm of Reign Holdings, targets to deliver 1,000 hotel apartment units in Dubai’s Jumeirah Village Circle (JVC) over the next few years to cater to the growing demand ahead of the Expo 2020. Samir Salya, chairman of Reign Holdings, says retail will be an integral part of such mixed-use developments. However, having the right retail concept to match the development is just as important.

“Most of our developments are Italian-themed hotel apartments, where our retail outlets shall be occupied by Italian restaurants and a range of luxury outlets,” says Salya. “We are very picky when it comes to deciding who will occupy or buy our retail outlets as the retail areas define the external look and image of the building. We would want to allow businesses that will be a value addition and requirement of our guests at the hotel. Moreover, since the theme of our project is boutique Italian suites designed by the famous Italian designer Giovanni, we prefer Italian cafes, restaurants or luxury spas and beauty clinics.”

Arthur & Hardman’s projects are all serviced apartments, so the developer has emphasised on having coffee shops and restaurants that allow residents to host meetings and guests.

“Many of our residents live in studio and one-bedroom apartments where it is hard to entertain guests; hence, the large lobbies and coffee shops provide an excellent space for hosting guests,” says Salya. “We require retail stores to follow our Italian theme and our hotel operator’s requirement.”

Location

Vijay Doshi, managing director of Vincitore Real Estate Development, says the location of a project and the existing retail mix within a community and its vicinity are important factors to consider when choosing the types of retail outlets required in a project.

“At Vincitore, we choose retail units based on the target customer — nationality, income, family size, etc,” says Doshi. “Our project, Vincitore Boulevard, is situated opposite the world-famous Dubai Miracle Garden, which we anticipate would attract over 2 million visitors a year. Hence, we would select brands that will aptly serve these customers in addition to premium branded stores that will add a luxe vibe to the boulevard walk.”

Thriving sector

“The UAE’s retail sector is expected to exceed $71 billion [Dh260.74 billion] by 2021,” says Doshi, noting that factors such as a rise in the number of tourists and the expansion of sales events, promotions and shopping festivals will all support its growth.

“Our view is that the future of UAE retail will gravitate towards service-oriented consumption and, hence, we are targeting developing leisure play areas, restaurants, cafes, branded saloons, pet shops and be a part of this thriving trend,” says Doshi. “Moreover, since Vincitore Real Estate is a branded realty company, we have framed our guidelines for the lease of retail units, and all retail shops will follow our guidelines and service mid and high-level income segments.”

As competition for prime retail space becomes more intense, developers have now become more selective with tenants, often conducting due diligence to ascertain each candidate’s track record and business plan.

“This trend is essential because the retail units within a project do not just facilitate the same building residents, but also help to enhance the development of the particular area,” says Adnan Al Hamly, CEO of Ghreiwati Property Development, noting how a well-known furniture outlet within Ghreiwati’s Murano Residences has helped generate business and footfall not just for the mixed-use property, but also for the Al Furjan area.

“We are fortunate to have the developments on the Al Asayel Boulevard, which attracts big names from all the retail sectors. It also gives us an opportunity to choose the retailers for our buildings to ensure that the residents of our buildings are guaranteed [quality] service by reliable names.”

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Housing and retail: Finding the right mix