| INVESTORS GO ON SHOPPING SPREE TO GAIN SAUDI RETAIL EDGE |
The launch of mega projects across Saudi Arabia marks a new opportunity for the global and domestic retail sector.
Research and Markets, an intelligence firm, estimates that the Saudi retail market is projected to register a compounded annual growth rate of around 6% during the forecast period of 2019-2024.
“Food and beverages category accounted for a nearly one-third market share in 2018 and the segment is anticipated to maintain its market dominance during the forecast period as well, backed by the widespread shift in pattern from staple food towards healthier, value-added alternatives,” the firm said.
Some of the major retail players operating in the Saudi market are Panda Retail Co (Savola Group), Lulu Group International (EMKE Group), Abdullah Al Othaim Markets Co., Fawaz Abdulaziz AlHokair Co., and Majid Al Futtaim Retail LLC.
Wholesale and retail trade account for just over 468,000 establishments in the kingdom, making it the biggest sector by number of entities, according to the latest available data from the General Authority for Statistics. Indeed, wholesale and retail made up 47% of all entities in the kingdom by the second quarter of 2019, data shows.
The sector employs just over 2 million workers, second only to construction, which employed 2.35 million workers, according to GSTATS.
The government’s focus on boosting employment of Saudi nationals in the retail sector is paying off, as the industry employed more than 434,000 Saudi nationals – easily the biggest concentration of the national workforce.
The sector boasts more than 270,000 Saudi men, and more than 164,200 Saudi women – the highest level in any sector.
The sector’s operating surplus stood at just under SAR 55 billion by the second quarter, data shows, with Internet sales comprising over 3% of all sales. Only 3% of the retail and wholesale establishments indicated that they have a website, which suggests there is a huge growth opportunity in ecommerce as well.
NEW DEVELOPMENTS
Close to 230,000 square metres (sqm) of retail space is expected to come on stream in Riyadh city alone, the biggest retail centre in the kingdom, according to real estate consultancy Jones Lang LaSalle. Notable upcoming projects include Shorofat Al Nada Park, Wadi Qurtoba, and Faisaliah Mall Extension.
The fourth quarter of last year saw 89,000 sqm of retail space, led by Riyadh Front located on the capital’s Airport Road, Hammad Mall (LAVALLE), Shorofat Al Khair, Garden Wood and Mercato Strip Mall, which raised the city’s total retail space to 2.4 million sqm – its highest level ever.
“Approximately 329,000 sqm of GLA is expected to enter the market over the next 12 to 24 months. Super-regional centres (Jeddah Park Serafi Mall and Avenue Mall) and community centres make up the majority of future supply,” JLL said in a new report on the kingdom’s retail sector.
“The mix of upcoming supply will enhance lifestyle experiences through cinemas, F&B offerings, and entertainment outlets as mall operators capitalise on new opportunities.”
The spate of new projects should also boost the retail sector.
According to Saudi Index, an interior design, fit-out and architecture event, more than 80 mega projects, each worth at least USD 1 billion, are currently underway or planned for completion by 2030.
This includes the USD 500 billion Neom City project, the USD 20 billion Dahiyat Al Fursan New City near Riyadh, the USD 1.9 billion The Avenues, the USD 7.8 billion King Abdullah Financial District, and the Al-Qiddiya Entertainment City. Each of the projects have a strong retail component and will provide plenty of opportunities for retailers.
In addition, the reintroduction of cinemas to the kingdom last year following a 35-year hiatus, coupled with other forms of public entertainment, is also expected to increase retail footfall.
The Savola Group, for example, which had 205 stores by end of 2019, said in its fourth quarter presentation that it will “continue to evaluate our store footprint keeping in view catchment area demographics and competitive landscape.”
According to KPMG research and analysis, there is a potential for the development of community centres which can cater to the demand generated by surrounding neighbourhoods. Furthermore, the development of super regional malls can also be considered for future investments, but it should be equipped with modern leisure and entertainment facilities.
“Due to the expansion of the city (Riyadh) toward the northern and eastern sides, these locations are ideal for development of retail space primarily due to lack of quality retail offerings within the area,” KPMG said in a new report. “With new residential communities being set up, we expect the new population in the area to feed into the demand for retail space, increasing the success of any retail development in the area.”
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