JEDDAH —The GCC's retail sales are expected to grow at a CAGR of 7.7 percent from end-2011 2 to reach $270.3 billion by 2016, Alpen Capital said in a report Sunday. Food retail sales are anticipated to expand at a CAGR of 8.8 percent during this period while non-food retail sales are likely to grow at an annual average growth rate of 6.6 percent. Food sales growth will outperform non-food sales growth during the forecast period as high-value and healthier food products could find greater demand. Sales of supermarkets and hypermarkets in the GCC are expected to grow at an annual average rate of 10.5 per cent between 2011 and 2016. The relatively under-penetrated markets in terms of modern grocery retail formats like Saudi Arabia, Qatar and Kuwait are likely to outperform in this segment. Duty free and travel retail sales in the Middle East are forecasted to grow at a CAGR of 11.6 percent from 2011 to 2016, outperforming the broader retail industry in terms of growth. The outlook for the luxury segment remains positive and is expected to expand at CAGR of 8.2 percent between 2011 and 2016. The region's retail sector has displayed strong resilience in the face of global economic downturn and is expected to continue to grow at a steady pace given its attractiveness to tourists and residents, geographic location, developed logistics and availability of diverse shopping options. While the sector presents attractive opportunities, it is highly competitive and retailers need to continue to innovate so that they can achieve sustainable growth and profitability. “Retail industry, which is one of the fastest growing sectors in the GCC, has thrived over the last several years due to increasing purchasing power, growing expatriate population, changing lifestyle and an expanding tourism & hospitality industry. Retailers have benefited from the government initiatives and progressive policy agenda and have a healthy period of growth ahead of them”, said Sameena Ahmad, Managing Director at Alpen Capital “The region's retail sector has displayed strong resilience in the face of global economic downturn and is expected to continue to grow at a steady pace given its attractiveness to tourists and residents in terms of geographic location, developed logistics and availability of diverse and quality shopping options. While the sector presents attractive opportunities, it is highly competitive and retailers need to continue to innovate, so that they can achieve sustainable growth and profitability,” said Mahboob Murshed, Managing Director, Alpen Capital. Food retail sales are anticipated to expand at a compound annual growth rate (CAGR) of 8.8 per cent during this period while non-food retail sales are likely to grow at an annual average growth rate of 6.6 per cent. Food sales growth will outperform non-food sales growth during the forecast period as high-value and healthier food products could find greater demand. Sales of supermarkets and hypermarkets in the GCC are expected to grow at an annual average rate of 10.5 per cent between 2011 and 2016. The relatively under-penetrated markets in terms of modern grocery retail formats like Saudi Arabia, Qatar and Kuwait are likely to outperform in this segment. Duty free and travel retail sales in the Middle East are forecast to grow at a CAGR of 11.6 per cent from 2011 to 2016, outperforming the broader retail industry in terms of growth. The growth projection has been revised upwards from the previous report primarily in anticipation of higher passenger traffic at the Abu Dhabi and Qatar airports and concourse 3 plans at the Dubai Airport. The outlook for the luxury segment remains positive and the luxury retail sales is expected to grow at a CAGR of 8.2 percent between 2011 and 2016. While retail sales in all the countries across the GCC region is expected to register positive growth through 2016, the outlook for Saudi Arabia is the most optimistic .The retail industry in Saudi Arabia is projected to expand at a CAGR of 9.5 percent between 2011 and 2016. All the other GCC nations are likely to register retail sales growth of around 5 percent-7 percent during the same period. Based on a Moderate Growth scenario calculated at 80 per cent occupancy over the next five years for the supply-side estimates, occupied gross leasable area (GLA) in the GCC is projected to reach 15.8 million sq m in 2016 compared to 11.4 million sq m in 2011 growing at a CAGR of 6.8 percent during the same period. Retailers are expected to continue their focus on improving efficiencies and making optimum utilization of retail space. Although the projected GLA additions in the GCC are unlikely to create an over-supply situation and vacancy rates are expected to remain under control, retailers may be selective in picking the right space for their stores in shopping malls. There are several factors contributing to the growth of the GCC retail sector. A consistently expanding population base, young population and growing urbanization make demographics of the GCC highly attractive for retailers of both essential and discretionary products. A growing GDP, substantial government spending on infrastructure and healthcare, low fuel prices and low or no tax incidence, free up a substantial portion of individuals' income for consumption of food and non-food items and fuelled the growth of the retail industry. GDP per capita (PPP) of all the GCC economies is high and is expected to see a healthy growth. — SG
