February 12, 2010
Quite
recently Syria started to witness a very big increase in the number of its shopping
malls. These are changing the country’s retail market, which until a few years
ago was mainly based on the classic old souks (the Souk Al-Hamidiyyeh, which is located
in the historical part of Damascus, is the oldest mall in the world). "Brands"
and "malls" are two new words for Syria, but the country is catching
up quite fast the shopping mall gap it has with the other Levant and Gulf
countries. In 2008, there were in Damascus an estimated 55,000 square meters (sq. m.) volume of gross leasable area (G.L.A.) for retail space according to Retail
International, a consultancy specialized in shopping centers.
After
one year, the same consultancy now estimates the Damascene G.L.A. at 100,000 sq. m.,
which means in other words an increase of almost 100 percent in just twelve months. Syria
is defined as an emerging market in comparison with Jordan or the Gulf
countries but, considering that the country has a population of 20 million,
although with very different purchasing power, with no doubt there is a great
potential for the retail industry.
Probably,
there are three main reasons for this big change:
1) The arrival of international brands. In fact, until 2003 in Syria the imports of foreign goods were banned. Then, that year it happened the loosening of government controls on international brands and, in particular, Syria’s garment industry started to produce international clothing brands under license agreements. In addition to this, there is now the tendency for international brands to open their selling points in centers where there are good facilities (for instance, a large parking space). The decision of loosening government controls with reference to international brands was primarily linked to the fact that Syria has to diversify its economy. Probably, already in 2010, Syria will be a net importer of oil and the retail sector is still quite underdeveloped.
1) The arrival of international brands. In fact, until 2003 in Syria the imports of foreign goods were banned. Then, that year it happened the loosening of government controls on international brands and, in particular, Syria’s garment industry started to produce international clothing brands under license agreements. In addition to this, there is now the tendency for international brands to open their selling points in centers where there are good facilities (for instance, a large parking space). The decision of loosening government controls with reference to international brands was primarily linked to the fact that Syria has to diversify its economy. Probably, already in 2010, Syria will be a net importer of oil and the retail sector is still quite underdeveloped.
2) Additional local spending by rich Syrians. It should be understood that shopping malls won’t change
immediately the way Syrians shop. The very traditional souks, where bargaining
is the most important activity, will continue to be the most essential trade
centers. Instead, shopping malls target a wealthier clientele. In other words,
the principal customers of the new commercial centers are the well-off Syrians who
until recently have used (always and only) to going shopping to Lebanon if not to Dubai
and the Gulf. According to Muhanned al-Mallah, general manager of
Damasquino Mall in Damascus, “Since the withdrawal of Syrian troops from
Lebanon, not a lot of people are going there. They are excited to find the
kinds of brands that they once found in Lebanon right here!” In particular, customers
in the 14-to-40 age range and belonging to the middle-to-upper
class very rarely go to souks.
3) Increased foreign investments. Thanks to high oil prices in the previous years, many Arab
investors have decided to look for new investment opportunities in the pristine
Syrian market while at the same time the Syrian government has progressively started to open up the
economy. According to Simon Thompson, head of Retail Investment, “there were
surplus funds from the wealthy Gulf states that enabled the major developers
and retail franchises to look further afield to new markets, of which Syria was
one”. The opening of the Syrian economy is connected with interest rates cut,
licenses for private banks and the creation of the stocks exchange market. Syria still today is not a member of the W.T.O., although it
submitted a request to start the accession process in 2001 (the country instead had been an original contracting party of the GATT, but it decided to withdraw
in 1951 following Israel’s joining). But, a relevant step toward attracting
foreign investments has been surely the development of regional free trade
agreements, like, since January 1, 2005, the Greater Arab Free Trade Area (GAFTA),
which eliminated customs duties between Syria and all the other members of
GAFTA.
At
the same time still three main problems may partially affect and slow the
growth of the Syrian retail sector:
1) Lack of diversification of brands in the
shopping centers. In fact, the brands
today present in Syria are not as many as in the other Middle East countries.
And for this reason, wealthy Syrians or Syrians who have a member of the family
living abroad still prefer going shopping abroad to Beirut or the Gulf
where there is a bigger range of shops — although this phenomenon is occurring in a reduced percentage in comparison to what had happened until few years ago. Nowadays, in Damascus
there are just 100,000 sq. m. of G.L.A. for a metropolitan area with a population of 4,5 million
(Amman has a population of 2 million and 200,000 sq. m. of mall space). This reduced amount of G.L.A. does limit
at least for now the possibility of new
entrants (additional foreign brands) to the Syrian retail market. In fact, in Syria, the
private sector does not own sufficient land in order to develop shopping malls
and, in the future, government-owned land has to be freed in order to develop new shopping malls.
2) Lack of retail management expertise in
the local market. In Syria, manifestly
there is little local expertise. It is sure that Syrian companies will be
forced to invest in retail management courses if they want to compete with the
much more sophisticated firms coming from the Gulf. Shopping malls staffs need
to be trained principally with reference to two subjects: English language and computer
literacy. This problem could be solved with the participation and affiliation
of the shopping malls to the Middle East Council of Shopping Malls (M.E.C.S.C.),
which is an invaluable tool for its members because it regularly provides
workshops that offer certificate programs focusing on different topics related
to the retail sector. The membership to this council permits to raise
ostensibly the standards of the performed activity.
3) Still a lot of high taxes and a myriad of
regulations for international brands. A
clear example of the difficulties to operate in Syria is exemplified by the
dispute regarding whether the French supermarket Carrefour is allowed to trade
using its own name (Carrefour) or it has to be named Shahba Mall Hypermarket
(Shahba Mall is the name of the shopping mall where the Carrefour supermarket
is located). In general, high tariffs are still levied on many imports, and for
some items tariffs can reach as much as 50 percent of the value. It is evident that these
high taxes naturally impede the development of high-end shopping. Given these high taxes, it is easier to find middle range brands in
Syria than the high-end ones, which after the taxes would be extremely expensive.
According to Mr. Muhanned al-Mallah “you have to know shopping centers and be
Syrian to be successful here”. This, evidently, means that to deal well with
complex regulations international brands are really advised to implement a
partnership with a Syrian partner.
Currently
Damascus has seven already opened city shopping malls (big and small). Town Center (2004, 35,000 sq. m.),
which is located in the southern outskirts of the city was, was the first store
of this kind. Ski-land
(2007, 10,000 sq. m.) is located along Airport Road and is a shopping mall and
entertainment place with Syria’s first ice-rink. Cham City Center (2006, 8,000 sq. m.) is in the new developed
area of Kafarsuseh and it displays international brands like Stefanel, Diadora
and Azzaro. Damascus Boulevard
(2,500 sq. m.) is situated near the Four Seasons Hotel and is dedicated for extremely
rich shoppers. Queen Center
is a very small commercial center located in Mezzeh and last, but not least, Damasquino Mall (2009, 24,000 sq. m.) is still in
Kafarsuseh and has more than 70 shops. Its structure is
very close to those shopping malls found in the U.S. or in the Persian Gulf because customers
are encouraged to walk past every shop. Damasquino Mall has introduced for the first time in
Syria brands like Nike, Lacoste, Clarks, Springfield, Lina’s CafĂ©, Second Cup
and Dr. Ocean for Seafood. In addition to this, Damasquino Mall has a 4-D movie
theater and a 4,000 sq. m. family entertainment center (Damasquino Mall adjoins
Cham City Center, but the two malls currently targets different types of
customers both in relations to age and social class). Further out of the city of
Damascus there is Trans Mall
(2008, 45,000 sq. m.) , which is operated by Aswaq Syria, the same group that owns
Damasquino Mall.
The
city of Aleppo is also building up many shopping malls. The first one was the New Mall in the Mogambo
district. In May 2009, with an investment of $10 million, the Addoumieh Group opened Al-Mounchieh (4,000 sq. m.), which is the city’s third mall. The country’s largest shopping mall Shahba Mall (80,000 sq. m.) is
located along the highway heading to Turkey (to the Turkish city named
Gaziantep) from Aleppo. It has been developed with an investment of $50 million
by a joint-venture between the Aleppo-based Sabbagh Group and the Jordanian Al
Kurdi Group. It includes shops, restaurants and coffee shops, a 4-star hotel
with more than 200 rooms, a movie theater, the first Syrian Virgin Megastore
and a French giant hypermarket Carrefour.
Current
projects yet to be completed include in Damascus a shopping center at the Eight Gate complex, which is a
multiple-use development (in construction) under the aegis of the joint-venture
between the Dubai-based firm Emaar Properties and the Investment Group Overseas
owned by the Syrian expatriate Mouaffaq Al-Gaddah. This development will
include a shopping mall (55,000 sq. m.), a 5-star and 15-story hotel, more than
200 tourist apartments and a 30-story office tower. Still in Damascus is on
construction with the support of the Syrian-based Urban Development Group, the Yafour Gardens project, which is a
60,000 sq. m. complex located along the highway to Beirut. This project is more
related to condominium buildings, but in the complex there will be integrated a
commercial center and a supermarket. Before 2013 is due to open along the
outskirts of Damascus — strategically positioned on the Beirut-Damascus Highway,
which is a key economic growth corridor — the Sabboura project by the U.A.E. Majid
Al Futtaim Group. This is a very ambitious project encompassing a mix of
hotels, offices, homes, retail outlets and a shopping mall the size of the Mall
of the Emirates in Dubai. The mixed-use project will have a built-up area of
1,500,000 sq. m. Sabboura Mall is set to be the largest in the Levant with a
Carrefour hypermarket, a 14-screen movie theater and more than 350 leading
retail shops. The Majid Al Futtaim Group is the group that in Dubai is behind
two relevant projects: the Mall of the Emirates and Deira City Center.
Sabboura should require, according to current projections, an investment valued around
$ 2 billion. Instead, Qatar Investments Authority is involved with the
investment in the construction of the QIA
mixed-use areas in Damascus and Lattakia, while the Syrian-based
conglomerate Toumeh International last year signed off for the Kafarsuseh tourism complex, which
will include a shopping mall (6,300 sq. m.) in Kafarsuseh, Damascus. Cham
Holding is now finalizing the Damascus
Hills project. This is a multi-use development that will cost more than
$3 billion and cover more than 5,000,000 sq. m. with a big retail sector. It will
be located in the northern outskirts of Damascus near to the highway heading
to Homs. Concord Al-Sham International Investments Company, a consortium
of Syrian investors who are bases in the U.A.E. is constructing the Dareyya development (150,000 sq. m.)
with a nine-story mall and a 23-floor office block in Dareyya along the main
Damascus-Jordan highway. Once completed, the project will include a hypermarket
and more than 40 international and national brand outlets. The current price is
around $80 million. Syria Holding is pushing the development of the Baramkeh
area in central Damascus so as to create Abraj
Syria, which is a mixed-use development. It will cost around $280 million and
obviously it will include considerable retail space with a hypermarket. The same
holding is also backing two other projects. The first one is Mezzeh Highway, a $70 million
mixed-use development (49,000 sq. m.) with 17,400 sq. m. of retail space located along
Mezzeh Highway in Damascus. The second is a build-operate-transfer contract (BOT)
signed with the Aleppo’s City Council. The idea is to build and develop Aleppo’s Gate (300,000 sq. m.), a
$60 development with included a shopping mall and a new transport hub for the
city. In addition to all these projects, Syria Holding has finalized a deal with
the Middle East hypermarket Spinneys in order to establish outlets in every of
its retail developments.
Sometimes
things do not proceed very smoothly as it is happening now with the Hejaz Souks project. This development was targeted at
modernizing the central district business of Damascus thanks to the
construction of a five-story shopping mall and a rail link supposed to join the
center of the city to the airport on an BOT basis. Since the beginning of the
works for this project in 2004 little progress has been accomplished. Problems
linked to urban management and opposition from heritage groups (N.G.O.s) have slowed
the pace of the construction, which is supported by Syria’s largest holding
company Cham Holding. But, this is one of very few delayed projects. In fact, the
retail sector in Syria is profoundly changing and modernizing. On the one side,
foreign and national retail companies are both more and more interested in the
Syrian retail market, while on the other side the Syrian government authorities
understand better the positive results that an improved retail sector may
provide to the global Syrian economy.
Summing up, it could be worth mentioning
some data from the regional business publication Executive. According to this
publication, Syria’s retail sector provide now jobs for 27 percent of the national
workforce and produces 17 percent of Syrian G.D.P. In addition to this, another
interesting indicator is that mainly for the presence of retail market space in
Syria (retail space where there are low-end, middle-end and high-end products) nowadays
4.8 million day-visitors from neighboring countries (1.8 million from Lebanon)
cross the border and enter Syria every year. These data exemplify one point
very clearly: Syria’s retail sector is important and will in the next years
continue to grow steadily.