FEATURE
Experiential Retail: Repositioning Saudi Arabia’s Retail Sector Saudi Arabia’s retail sector is undergoing a range of changes in both the supply and demand side. CBRE highlights the importance of understanding and delivering successful demand drivers, particularly in the food and beverage segment of the market, and their impact on asset performance.
Anthony Spary
T
he retail sector in Saudi Arabia has been undergoing material structural shifts over recent years which have underpinned significant changes in both the supply and demand of retail amenities. These shifts have largely stemmed from changes in legislation which have ranged from the reintroduction of cinemas, 100% foreign ownership, to the implementation of Saudisation in the sector. Over this period, we have also seen changes in consumer spending patterns, driven by the reductions in cost-of-living allowances, relatively anemic growth in average real wages, the growth in e-commerce and demographic shifts. The onset of the pandemic not only accelerated the pace of these changes but also has introduced new complexities in the market. The increase in the rate of VAT from 5% to 15% has further impacted the purchasing power of consumers. This combined with an uncertain economic backdrop, decline in international visitation, increased e-commerce take-up and on-going social mobility restrictions, have materially impacted the retail sector. According to estimates by Euromonitor, the total value of store-based retailing in Saudi Arabia fell year-on-year by 15.9% in 2020, with many retailers consolidating
RETAIL PEOPLE . NOV - DEC 2021
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DIRECTOR – HEAD OF OFFICE INVESTOR LEASING & RETAIL CBRE
or closing branded stores all together given the tougher trading conditions. However, as mentioned above, the retail sector was already facing headwinds prior to the pandemic, where in the four years to 2019, total storebased retail sales fell by 1.0%. This is despite the increasing levels of recreational spending over this period.
