The CEO of Related Urban explains why Abu Dhabi is the next big GCC retail destination
While it isn’t yet the shopper’s haven that Dubai is, Abu Dhabi has always been keen to ramp up its retail offerings, with major upcoming malls in store. Aldar Properties officially opened its much-awaited Yas Mall in November, and Abu Dhabi’s retail sector is attracting foreign investment as well, with Kuwait-based United Projects for Aviation Services Company investing about $224 million in the upcoming Reem Mall, an 185,806sqm shopping centre on Reem Island.
According to a report by real estate consultancy CBRE, Abu Dhabi delivered 168,000sqm of retail space in 2013. The city also has an additional 778,000sqm in the pipeline for development, placing it in the top 20 cities globally for shopping centre development.
Amidst all this development, the capital is set to welcome another addition in 2018: the $1.4 billion Al Maryah Central, on Al Maryah Island. Construction work has begun on the project, with opening slated for March 1, 2018.
The 214,000sqm shopping centre is being developed in Abu Dhabi by Gulf Related, a joint venture between asset management firm Gulf Capital and Related Companies, a US-based real estate development and investment firm. Related Companies has worked on several major projects in the US, including a 260,000sqm mixed-use project in New York serving as the Time Warner world headquarters.
Kenneth Himmel is president and CEO of Related Urban, the mixed-use development division of Related Companies. With 30 years of experience in mixed-use development under his belt, Himmel is also managing partner of Gulf Related, which was formed to pursue real estate development opportunities in Abu Dhabi and the Kingdom of Saudi Arabia.
“We’re involved very heavily in Boston, Chicago, San Francisco, Los Angeles, Miami, so we cover a lot of geography in the US,” Himmel tells Big Project ME at the ground-breaking ceremony for Al Maryah Central.
Another significant project currently underway is Hudson Yards in New York, a 1.6 million sqm mixed-use development that will house the new headquarters of Time Warner, as well as the offices of other major brands like Coach, L’Oreal and the German software company SAP.
“Hudson Yards is our biggest project, which is on New York’s West Side. It’s the largest real estate project in the United States ever. We have a massive team of people working on it,” Himmel says.
The development will include commercial and residential space, five office towers, shops, restaurants, a public school and a 175-room luxury hotel.
“One of the investors, in our company in the US, is Mubadala. And they invested in our company about seven years ago. So it was a pretty natural thing when I came here and we did a joint venture with Gulf Capital,” Himmel says. “After spending a year looking at many projects all over the region… we came back here and said this is really where we should do business in Abu Dhabi. For the kind of thing we wanted to do, the island and the opportunity in the island became most interesting.”
Work on the Al Maryah Central project has begun, with the main contractor expected to be announced next year. “We’re underway with the subcontractor for the site work, but the major contractor won’t be selected until next spring,” Himmel says, adding that the decision will likely be made in April or May. “We’re going to select the contractor based on design development drawings, and complete all the drawings with the contractor.”
The project is being financed with both debt and equity, and is scheduled for completion within the next four years. “We have all the equity in place and all the debt committed. It’s 100% committed in terms of capital. We’re opening March 1 of 2018,” Himmel says, adding that the entire megaproject will be opened in a single phase.
“I don’t open in phases. You only get one chance to open,” he asserts, rather cockily.
The Al Maryah Central mall will be located adjacent to an existing high-end shopping centre on Al Maryah Island – the Galleria mall, also developed by Gulf Related. The two malls will be connected by a bridge.
“When we developed the Galleria in a joint venture with Mubadala, it was a very different project before we got involved,” Himmel says. “It was only about 18,000sqm of retailing, less than that actually. And it was never geared to the kind of retailing we did. So we reinvented that project and presented our vision to them, and then we did a joint venture with them and we executed the whole project.”
Commenting on why the developer decided to build a second mall next to an existing shopping centre, Himmel says there was unmet demand for retail space even after the Galleria was complete.
“Al Maryah Central came about because of the enormous success and the demand from the Galleria. We actually had unmet demand. We finished leasing the Galleria, we had something like 37,000sqm of retailers we had no place to put… so my architect and I did a remaster plan of the island, and we rezoned the island to take a major shopping centre.”
The Al Maryah Central mall will also be the first shopping centre outside the US to feature the iconic American department store Macy’s. “I do a lot of business with Macy’s and Bloomingdale’s in the US, so we together convinced them to do the first Macy’s store outside the United States, which I think is going to be spectacular,” Himmel says. “Macy’s is very popular in the US, and it’s got a price point. It’s quality value-driven, very promotional, with lots of great brands.”
The mall will also house the UAE’s second Bloomingdale’s (the first is in Dubai Mall). While Macy’s will be more value-driven, Bloomingdale’s will cater to the more high-end side of the market, Himmel notes.
“You have a luxury department store and a great value-driven promotional department store very complementary to each other.”
This kind of complementary relationship between the high-end and the value-driven will exist between the Galleria and Al Maryah Central mall as well. While the Galleria mostly features luxury brands, Al Maryah Central will offer a more diverse selection for shoppers, Himmel insists.
“At its peak, [the Galleria] will draw five million people a year. It won’t draw any more than that because it’s so luxurious.
“[Al Maryah Central] will draw over 20 million people a year. We’ve done the research,our department stores have done the research. So combined, you’re talking 25 million people a year,” he explains, adding that he doesn’t expect any cannibalisation of revenue between the two malls. “They’re totally different tenant mixes.”
Himmel adds that he is optimistic about the future of tourism in Abu Dhabi and the UAE, on account of the country’s location, which makes it a hub for retail and travel.
“India, China, Eastern Europe, North Africa – you’re talking a four-hour flight time [and] almost two and a half billion people. They’re going to come. There’s no question.”
The developer does not have any other projects in the pipeline for the UAE at the moment. “When you see this project, when you see how big and complicated this is, we’re not doing anything else right now. This has got all of our attention.”