OVERVIEW

The Syrian government, report Oxford Business Group, is actively encouraging private investment in the traditionally state-dominated construction sector as part of its drive to counteract falling oil revenues with growth in other areas.
Several high-profile Gulf investors are backing big projects. In terms of new developments, tourism is drawing a lot of the attention while there is a growing level of private sector interest in Syria's infrastructure. Residential construction is centred around areas outside the city limits, in particular around the highways leading from Damascus to Beirut and Daraa. Receiving the most attention is Yafour, thanks to its selection as Emirati developer Emaar's site for its Eighth Gate project. In terms of retail construction, mall culture is taking root in Syria, offering good and relatively fast returns to investors. The big news in 2008, was the passing of a new construction law, the goal of which is to pave the way for whole new cities to be built, putting in place a framework that will allow for the establishment of companies while guaranteeing the rights of the government and investors. Oxford Business Group say that Syria sees itself as a major crossroads for trade, located as it is on the north-south and east-west axis between Europe, Africa and the Middle East. As such, Syria has been a strong supporter of proposals to link the rail systems of the Middle East, which would create a vast network running all the way from Turkey through to the Gulf and North Africa including to connect the Syrian rail network with Iraq's - a project that would give the latter country a land link to the Mediterranean and serve to boost trade at Syria's ports.

Work is also under way to improve the Damascus International Airport, including a $59m upgrade of passenger facilities due to be completed this year, while an extensive renovation of the Deir El Zor Airport in the east of Syria was completed in early 2008. Long-term plans for the Damascus air hub foresee its capacity increased from the current 3.2m to around 8m passengers annually.

The road network, which now covers more than 50,000 kilometres, is also being improved. One of the major projects in the pipeline is the $380m Damascus Ring Highway, to be constructed by private contractors on a build-operate-transfer basis. The draft 2009 budget, approved by President Bashar Al Assad in late December, allocated $5.5bn for investment projects, out of a planned expenditure of $13.7bn. The transport and communications sectors will share just $760m for capital expenditure.

Syria is changing dramatically. Damascus stores now carry Western brand-name goods, unimaginable just a few years ago. The city’s young, reports ‘Syria Comment’ no longer flock to Beirut for their nightlife as the city according to some locals is undergoing “Beirutization”. Over half the population of some 19 million, is reckoned to be under the age of 20. Record oil prices have helped the country change coupled with the arrival of serious investors from the Gulf and Iran. Majid Al Futtaim Investments and Emaar, both from Dubai, and the Saudi Binladin Group from KSA are understood to be planning a series of retail centres, not just in Damascus, but also in other leading cities such as Aleppo and Latakia.

Damascus

Majid Al Futtaim Group is proceeding with the development of a US$2bn mixed-use urban development in Sabboura, an area located on the outskirts of Damascus. This is expected to become a major tourist destination, offering at its core a super regional shopping, entertainment and lifestyle resort with 200,000m2 gross leasable area (GLA), 350 retail stores and numerous dining facilities and 2 hotels.

Qatar Investment Authority is reported to be investing US$250m in a mixed-use project in Latakia and has agreed to build a 550,000m2 commercial and residential district in Damascus. Meanwhile Emaar Syria is getting on with the sale of office space in its Eighth Gate Damascus project and Al Futtaim Group announced it would study the possibility to build a Damascus Festival City. The Commercial Center of The Eighth Gate offers a classical style piazza. Anchored by a 35-storey office tower, the main plaza also embraces low-rise commercial buildings and a 45,000m2 retail mall inspired by the souks of old Damascus.

Currently the main organised retail offering in Damascus is provided in Town Center mall, situated on the Damascus-Amman highway, comprising some 35,000m2 over five floors and Cham City Center in the heart of the city covering some 40,000m2 on seven levels.

Aleppo

In Aleppo, Jordan based Kurdi Group is working on Shahba Mall strategically located on the Syria-Turkey highway and comprising a shopping, entertainment, hotel complex of 120,000m2 total area and total mall area of 86,000m2.
And Addoumieh Group are developing a 4,000m2 department store for opening in June 2009. It will not be long, however, before these are joined by much larger malls offering stiff competition.
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HINDSIGHT

By Simon Thomson,
Principal Retail International®
Based on an article published in 2005

 
It’s better travelling than to arrive if the age-old adage is to be believed. For the past 25 years or so, mall development in the Gulf has been travelling and, in most cases, continues to do so in a forward direction.

Generalities however no longer apply to Dubai. Where once it travelled, in retail terms the destination will soon be reached. Having set out along the route to build the biggest, most expensive etc malls on the planet (the adjectives go on and on), these goals are being attained with the arrival in Dubai of a clutch of retail resorts. The term ‘mega mall’ seems hardly to do justice to the likes of Ibn Battuta, Mall of the Emirates, Dubai Festival City, Dubai Mall and City of Arabia. Ranging in size from upwards of 150,000 sq.m to over 550,000 sq.m and then some, the journey forward - if there is to be one - is about to get much tougher.

Once the task was to build a mall capable of extolling the most superlatives. Now that this is being achieved, the question must be as to what mall developers in Dubai can offer up to out-compete with themselves.

Throw enough resources to create a bigger example of an existing product may require financial muscle and technical experts, but having successfully done so, needs considerable creative skill and ingenuity to develop an even more successful follow up.

As in sport, commerce performs best when striving to win the world championship. Having won the size stakes the challenge for Dubai in the coming years is not only to retain that particular trophy – with the likes of China in hot pursuit – but as to how it ups its game in terms of overall retail offer to win the global challenge year on year.

By contrast to Dubai, the remainder of the Gulf and the region generally are still only in the evolutionary stage. The likes of Abu Dhabi, Doha, Manama and Kuwait all have projects or plans for projects that in some way will replicate what will have been completed in Dubai over the next few years – or sooner. Many with exotic features such as artificial islands combining retail with villa and hotel resorts. Mostly these appear to be targeted at the well heeled from within the Gulf or further afield.

In Saudi Arabia and the Levant the profile of most shopping malls still adheres to a basic pattern of meeting the regular needs of an ever expanding population with most malls anchored by a hypermarket.

French brand Carrefour, pioneered some years ago by its local partner MAF Investments (MAFI), has carved out a significant position for itself initially in the UAE and now ever more widely in the region. Battle is being joined in MAFI’s own back yard with the arrival of French rival Géant at Ibn Battuta Mall in spring 2005 and the keenly awaited opening of HyperPanda from the Saudi Savola Group at Dubai Festival City.

Each has announced plans for the rolling out of further stores across the region in the coming months and years. So too has another local brand, LuLu Hypermarket, part of the UAE’s Emke Group with some 40 to 50 outlets already across the region, but typically in freestanding locations.

Notwithstanding the dash for global status by Dubai, the rate of growth being witnessed in the retail sector generally would not have taken place without the basic demographic fundamentals being in place. The two cornerstones of which are people and money. The countries of this region have been experiencing a largely unreported population explosion in recent years – in certain cases a doubling within a generation.

Generally, the overall economic situation has been very positive, transforming into a volcanic eruption of cash in the past 18 months caused by the massive hike in the price of crude oil.

The combination of a young, growing and affluent population is the ingredient for which all retailers crave. Furthermore, this scenario is overlaid with a significant population of well paid expatriates and a growing number of tourists.

It is hardly surprising, therefore, that the opportunities the Middle East now offers to international retailers are now taken rather more seriously in their boardrooms than was the case ten years ago. Then it was a missionary venture to sell the opportunity, now it is a case of talking to the converted – almost.

From less than 50 or so international retail fascias represented in the GCC in 1990, there are now reckoned to be over 400 with more being added each year. Moreover, the master franchisees operating these brands in the Gulf are now extending their presence beyond the Gulf not only to the Levant but also to Turkey, Russia and India.

Dubai based developers such as Emaar Properties plan to invest $4 billion to develop 100 shopping malls in the Middle East, North Africa and Indian sub-continent, and Dubai International Properties are developing projects in Doha, Istanbul and elsewhere. Thus the considerable expertise and experience gained from Dubai is being made available to these less developed retail markets.

Abundance of spending power, however, with but few exceptions is considerably less than in the UAE. Where coffers in the oil rich Gulf have provided the certainty of a soft landing for any mistakes, the more populous but less wealthy emerging markets offer less room for ‘swerve’. Thus starkly underlining the desirability of doing the ground work of market research, and getting the correct market positioning and tenant mix right before - and not after - pouring the concrete.

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