Kuwait Retail Market
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- Kuwait Retail Market
Kuwait Real Estate Market: Retail
Retail sector consists of retail malls, retail plazas, F&B plazas, mixed use properties and other properties like cooperative societies and souks.
The above chart shows the share of different types of properties in Kuwait. Out of the total 5.5 million retail space, F&B plazas account for approximately 74% (4.11 million m2)of the retail space followed by retail malls with 16% share which accounts to 0.9 million m2 of space. Retail plazas and mixed use properties have a share of 6% and 2% in the retail space.
The retail space supply has increased over the years in Kuwait. The inventory increased steadily from 1.08 million m2 in 2018 to 1.5 million m2 in 2022. Assima Mall was recently opened, adding to more than 70,000 m2 to the leasable area. While the inventory has increased, a drop in occupancy levels was seen during the same period which was mainly due to an increased retail space supply as compared to absorption. Occupancy ratio dropped from 93.9% in 2019 to 85.5% in 2022.
The retail space absorption in 2019 was 134,078 m2 which declined to 11,581m2 in 2021 due to the overall market slowdown. However, the absorption increased to 59,985 m2 in 2022. Due to the market disruptions since 2020, the retail space absorption took place at lower price points as compared to the previous years. Lease Rates also witnessed a correction in 2020 and 2021. A drop of 10-15% was witnessed in the overall retail markets in Kuwait. Landlords offered rent free periods during the pandemic to cope with the drop in occupancy levels. Furthermore, due to Pandemic the key money which was prevalent in the market is gradually diminishing from the market as the retailers are no longer willing to lock a large amount of money upfront in the market.
Outlook
The retail space is expected to witness a handful of projects in the coming 4-5 years. Tamdeen mall is already under construction. Furthermore, a new mall in Egaila and Tamdeen square phase 2 is announced and the construction is expected to complete in next 4-5 years. The J2 and J3 projects have been allocated and the projects are planned to complete by next 5 years. Bids have also been submitted for a souq project in Sabah Al Ahmed city. Once allocated, the project is expected to complete in 5 years.
The retail space inventory was around 1.5 millions m2 in 2022. We expect it to reach 1.81 millions m2 by 2025. The lease rates in the coming period is expected to remain stable as the retailers are reluctant in giving large key money upfront to the property owners
Retail malls are gradually transforming into lifestyle destination for the families with increasing leisure and dining activities. The share of entertainment centres, F&B and gym and fitness centres are also expected to rise in the coming period.