| REPORT SHINES SPOTLIGHT ON SAUDI’S RETAIL POTENTIAL |
Saudi Arabia’s retail market, already the Gulf region’s largest, will become a USD 119 billion industry by 2023, growing at a fast clip of 12%, according to a report by Euromonitor International, a global research house.
Euromonitor data indicated that the kingdom’s store-based retail sector will expand by 10.02% to reach more than USD 113 billion over the next four years, from nearly USD 103 billion in 2018.
In addition, non-store retail, which include online shopping, direct selling, mobile Internet, social media and home shopping, will become a USD 5.6 billion industry, growing at 93.47%, the fastest growth in the GCC region.
The retail sector is expected to accelerate as the Vision 2030 programme takes hold and the government rolls out the development of cinemas and entertainment centres, in addition to health and fitness outlets.
With e-commerce on the rise, cinemas, F&B and entertainment options are becoming increasingly important features of shopping centres, and will continue to play a greater role in their performance,” said Jones Lang LaSalle, a real estate consultancy. “Going forward, we expect mall operators to implement ‘Shoppertainment’ methods to differentiate their space from other retail offerings and ensure higher footfalls.
The Riyadh retail market will likely see a spate of new projects, including Hamad Mall, Elegant Center, Deem Center, Deyyafa, al-Takhassusi Plaza, Mercato Strip Mall, Binayat Center, Elite, Laban Plaza, Olaya Plaza, Souq Hittin, and Garden Wood.
JLL expects 410,000 square metres (sqm) of gross leasable area (GLA) to come on to the market over the next two years in the capital alone. Vacancy rates in Riyadh stands at around 15%.
Similarly, Jeddah will also see the completion of over 334,000 sqm of GLA in 2019 and 140,000 sqm in 2020, with super regional shopping centres dominating the landscape, apart from community and neighbourhood centres. JLL noted that retail vacancy rates in the city stood at 11%.
RETAIL REFORMS
The government has enforced a number of reforms in the retail sector over the past few years. These include 100% ownership in the sector and a strong drive towards nationalisation.
The move to restrict four types of retail roles to Saudis could unlock 180,000 to 200,000 jobs for nationals, according to KPMG. In the first phase that was enforced on 11 September 2018, four types of retail jobs in areas such as cars, ready-made garments, furniture and kitchenware, will be off-limits to foreign workers.
Since November, retail jobs in electrical appliances and electronics shops, and shops selling watches and optical instruments, will need to be filled by Saudi workers.
From January, that law will be applicable to establishments selling medical appliances and equipment, building and construction materials, vehicle spare parts, carpets, and confectionary.
NEW COMPANIES
The Saudi retail sector was also buoyed by the initial public offering of Leejam Sports Company on the Tadawul stock market in September. The company operates the largest network of fitness centres in the Middle East and North Africa (MENA) region under the Fitness Time brand with 112 operational fitness centres in 23 cities in the kingdom and three cities in UAE. Additionally, 31 fitness centres are under development, according to its prospectus.
The company is also exploring opportunities to partner with adjacent and/or complementary businesses for selling purposes, while developing new points of sale, which include a new website and member mobile application and are expected to be launched in the first quarter of 2019,” the prospectus noted.
International investors are also eyeing the burgeoning Saudi market. UAE’s Lulu Group International signed in November 2018 an agreement with the Saudi Arabian National Guard Forces (SANG) to open two shopping centres and seven supermarkets in Dammam and Al Ahsa.
The retail outlets will be operational inside the SANG campuses to serve National Guard officials and their families. With 15 upcoming projects, LuLu currently operates 14 hypermarkets and 10 ARAMCO commissaries in different parts of Saudi Arabia.
In December, Lulu opened its 15th supermarket in Saudi Arabia, located at the heart of Al Kharj. The new hypermarket covers a total built-up area of more than 161,000 square feet.
The retail sector is expected to get greater impetus as new cinemas are built over the next few years, apart from a focus on health and fitness centres, which are key planks of the Quality of Life programme to boost the Saudi citizens’ quality of life.
The programme encourages the private sector to invest in new sectors that are directly related to the quality of life and well-being of citizens. Moreover, it provides the environment appropriate for attracting foreign investments in these sectors,” according to the Quality of Life document.
The Programme also contributes to the development and diversity of the national economy, through the establishment of special areas, the reconstruction of economic cities and the development of the sectors of sport, entertainment, culture, and arts.
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