Riyadh Retail Market Research Report And Market Forecast To 2023: Ken Research How Riyadh Retail

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Riyadh Retail Market
Research Report And Market Forecast To 2023: Ken Research

How
Riyadh Retail Market is Positioned?

Riyadh, the capital city of Saudi Arabia is situated on a plateau in
the centre of the Arabian Peninsula. The retail industry in Riyadh is slowly
transforming to the western model. Majority of the kingdom’s retail outlets in
Riyadh are spread across super-regional, regional and structured shopping
centers that have replaced the traditional strip malls and shopping center
retail concept. The retail sector in Saudi Arabia has been hardest hit on the
demand side by the expatriate exodus. Consumer staples have borne the brunt of
the downturn. The cut-throat price-cutting has eased down a bit, but consumers
are still price-sensitive. The retail real estate market has witnessed
oversupply of retail space over the past few years. The supply-demand gap
witnessed an unprecedented increase of ~% in 2018 owing to lower demand in
Western and Southern Region, increasing preference for online shopping, lack of
international brands and several other reasons. The average occupancy rates of super-regional,
regional and community center malls within Riyadh were evaluated at ~%, ~% and ~%
respectively in the year 2018.

Factors Influencing the
Residential Market in Riyadh

Cinemas, Food & Beverages,
Entertainments Segments in Shopping Centers

With e-commerce on the rise, cinemas, F&B and entertainment
options are becoming increasingly important features of shopping centers, and
will continue to play a greater role in influencing this retailing sector.
Saudis were spending about USD ~ billion annually on tourism and development
outside the Kingdom, which makes the argument to allow movie theatres open a
domestic market expected to be worth up to USD ~ billion in annual box-office
sales by 2030.

Retail
Spending Trends

Retail spending which includes revenue generated from food and
non-food retail outlets ranging from small convenience stores to large scale
supermarkets and hypermarkets has been rapidly rising in the city. The rise in
per capita disposable income in the country has positively impacted an
individual’s expenditure on food and non-food products during the review
period. This has enhanced profit for a broad category of retailers ranging from
single store retail outlets to those located in malls.

Introduction of VAT

In a market that has been tax-free, the introduction of VAT, even at a
relatively low rate of 5.0%, has caused a shift in consumer behavior. The
consumers in Saudi are cost-conscious. Companies that can tap into additional
value through economies of scale, or provide greater convenience, are reaping
the rewards.

However, the retail sector is expected to rebound by 2019. The Saudi
government’s initiatives such as allowances to public sector employees and
increases in subsidies and social spending will help boost the purchasing power
of Saudi citizens.

Tourism, Population and
Demographics

Another major factor influencing the retail
market in Riyadh is the tourism. This strong growth in the tourist
arrivals has impacted positively on retailers. The international arrivals to
Saudi Arabia are expected to increase ~% per year from 2018 to 2023. Moreover,
the majority ~% of the population is aged 30 or under, the prime market for
retailers. They are probably newlyweds so household formation is a big driver -
the furniture and white goods needed in a new house, all the other things that
follow: nursery items, children’s outfits, and so on.

Rising Disposable Income

The disposable income in the country were estimated to reach SAR ~
billion in 2018 increasing from SAR ~ billion during 2013 at a CAGR of ~% over
the years. The growth in disposable income has improved the standard of living
with individuals increasing their expenditure on entertainment and consumer
retail products.

The rising expenditure by individuals has positively impacted demand
for retail space, especially in regional and super-regional malls.

Growing Presence of
Hypermarkets and Supermarkets

Hypermarket and supermarket chains continue to expand in Saudi Arabia.
The total number of supermarkets and hypermarkets in Saudi Arabia in 2016 were
estimated at ~ stores, accounting for approximately ~% of retail outlets.

A major trend witnessed in recent years is the shift in location of
hypermarkets and supermarkets from stand-alone stores towards developed
regional and super-regional malls due to the increase annual footfall across
these retail formats.

Major hypermarkets including Abdullah AlOthaim Markets, Lulu Group and
Savola Group have built supermarkets and hypermarkets with dedicated area for
retail outlets, restaurants and family entertainment zone.

Emergence of International
Brands

A high amount of retail space is expected to enter the market to meet
the demand generated by the emerging international brands. Currently, there are
numerous international brands that are willing to open stores in Riyadh since
the opening up of the economy and growing awareness of international brands
within the general public.

Relaxation in Investment
Regulation

Given the oversupply of retail space, especially in Riyadh, the
government has eased investment regulation in the retail sector to boost inflow
of international brands into the country. In June 2016, the Saudi government
announced that it will allow foreign companies to wholly own Companies in the
Saudi retail and wholesale trade sector (allowance of ~% FDI). Foreign
companies were previously required to partner with Saudi investors to establish
retail or wholesale outlets, and may still find it advantageous to do so.

Tenant Mix

The shift towards mega and structured shopping malls has been the
result of tenants who were seeking to garner the benefit from the higher
footfall and integrated spaces and a shift in consumer shopping experience
towards leisure and entertainment. Tenant mix in the resident malls is mainly
focused on fashion with more than ~% space, health & beauty holds around ~%
space and the entertainment section has around ~% space in the overall mall. To
attract the customers and get them walking through the entire centre,
designers, developers, and managers try to optimize the selection and special
configuration of tenants in a shopping center. The attractiveness of shopping
centers is at least partially related to the composition of the tenant mix.

Climate Conditions

Majority of cities in Saudi Arabia either experience hot and humid
weather or hot and dry weather throughout the year, making indoor facilities an
ideal leisure destination amongst the population. Thus, majority of individuals
prefer to spend their summer vacation and free time in malls and community
centers, especially during the festival of Ramadan.

Key
Segments Covered:-

Type of
Malls

Super-Regional
Malls

Regional
Malls

Community
Center Malls

Key Target Audience:-

Retail
Project Developers

Third
Party Real Estate Companies

Independent
Architects

Government
Associations

Government
Agencies

Independent
Investors