DOHA: The retail sector in the GCC has displayed strong resilience in the face of global economic downturn and is expected to reach $270bn by the end of 2016 with a CAGR of 7.7 percent, a latest report on retail industry published by Alpen Capital said recently.
The report provides a perspective of the overall retail industry, major market characteristics, and future trends. By examining fundamental growth drivers, significant challenges and recent developments, it presents an outlook for the GCC’s retail industry based on demand-side and supply-side approaches.
“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 and 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 (pictured), 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”, says Mahboob Murshed, Managing Director, Alpen Capital
As per the demand side estimates, between 2011 and 2016, the GCC’s retail sales are expected to grow at a CAGR of 7.7 percent to reach $270.3bn by the end of the forecast period.
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.
Based on a moderate growth scenario calculated at 80 percent occupancy over the next five years for the supply-side estimates, occupied gross leasable area (GLA) in the GCC is projected to reach 15.8msqm in 2016 compared to 11.4msqm 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.
Among the growth drivers, 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. The region’s population growth rate has accelerated over the last three years, and is expected to sustain the pace going forward.
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.