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Physical experience still integral to KSA retail space

Mall of Arabia
Point of sale transactions have shown nearly 2x growth, as shoppers move to smaller outlets in the Saudi retail space.

Malls and retail centres in the Saudi retail space are seeing increased customer preference for the physical retail experience, according to JLL’s Q2 2021 report on Saudi Arabia’s real estate market.

The report said that the Saudi retail space saw higher footfall in malls and retail centres. It highlighted an increase in point of sale transactions over the past few weeks, citing information from Saudi’s central bank, SAMA. 

Point of sale transactions have nearly doubled as compared to the same period last year, the report stated, indicating that the physical retail experience still holds customer value despite the growth of ecommerce.

In May this year, POS transactions grew by 72% to about USD 10.7 billion, from around USD 6 million in the same month last year. Moreover, the total number of processed transactions – 407 million in May 2021 – grew by 155% year on year.

KEY TRENDS IN THE SAUDI RETAIL SPACE

According to the JLL report, shoppers are spending more time in smaller retail developments. This was demonstrated by the resilience of community centres, the report noted.

Further, Saudi retailers have actively adopted hybrid business models as a means to address a growing demand for retailers to have an online presence. Retailers have been investing in fulfilment centres, and also enhancing the digital customer experience.

Further, incoming supply in the Saudi retail space is likely to continue to place “pressure on performance.” At the same time, however, the higher footfall in malls and retail centres point toward economic recovery. This may reflect in the performance of the Saudi retail space, the report said.

About 600,000 square metres of gross lettable area are expected to be delivered in the second half of 2021, according to the report. These are located in the key markets of Riyadh, Jeddah, Dammam Metropolitan Area, and Makkah. 

All four markets have seen a drop in average rental rates in regional and super regional malls. Overall, owing to supply constraints, the Saudi retail space is expected to continue to be tenant-oriented.

“Going forward, to sustain performance of brick-and-mortar retail, the upcoming supply will remain focused on customer experience. We are likely to see an increasing number of unique lifestyle developments and digitisation of stores to enrich the overall experience,” Abdullah Alshabanat, JLL Research Manager for Saudi Arabia, said in a statement by JLL.

Photo credit: www.echoarchitecture.com

 

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