Makkah sees surge in ‘destination’ malls

Retail demand in Makkah is generated from two distinct segments — the city’s residents and the Haj and Umrah pilgrims, Colliers International, the global commercial real estate leader, said in its latest white paper on the retail sector in Makkah.

The city’s retail sector’s short-term and a medium-to long-term outlook is expected to see an increase in the supply of large malls or “destination” malls, the report noted.

These have shaped the retail landscape in the city with shopping centres that mainly cater to pilgrims concentrated in the vicinity of the Holy Haram and retail centres serving the residents located to the north of the city closer to the residential areas.

With the city’s supply significantly lower than other cities in the Kingdom, the paper sheds light on this anomaly due to a lower mall density despite the city’s large population base and the international pilgrim’s visitations.

The research highlights the changes in the structure of the retail landscape by looking at supply and demand dynamics, potential opportunities and the challenges facing the sector cumulating with an outlook of the sector’s performance.

“The key challenges facing Makkah’s retail sector could be mainly attributed to a combination of the shortage of large and suitable land plots for mall developments and the high land prices relative to other cities in the Kingdom. High infrastructure cost and the city’s residents’ preference towards shopping in Jeddah have limited the development of new shopping centres,” said Imad Damrah, Managing Director, Colliers International KSA.

He added that “with the execution of several strategic infrastructure and transportation projects, along with the vision 2030, capacity is expected to rise substantially, translating into significant growth in the numbers of visitors/pilgrims. This will fuel the city’s local economy resulting in an increase in consumption, retail sales and demand for new retail projects.”

Ian Albert, Regional Director and Head of research and Advisory, Colliers International MENA, added: “Alongside recent government emphasis on promoting the Kingdom as a leisure and entertainment destination, more space should be dedicated to distinctive family-oriented entertainment themes. F&B outlets are essential to differentiate those new shopping experiences from the existing traditional centres and to compete with Jeddah.”