Empty malls, with half the shops closed, are a common feature in the Kurdistan capital of Erbil. It has been reported that most of the malls in Kurdistan are not even matching international standards. Though, it seems that Kurdistan government is still keen on focusing on the shopping mall concept.
And that’s only part of the explanation, says Edward Carnegy, managing director of IKG Property in Erbil, while trying to add some color to the Market Overview the company made for the fourth quarter of 2013. It is the second overview IKG publishes.
Iraqi Kurds are proud of their malls, as a sign of modernity – Erbil alone has around 10 at the moment. After the main one, the Majidi Mall, was built in 2009, many followed. But only four come near international standards, Carnegy says.
That means that they should offer a balanced mix of shops and products, he explains, as well as enough stairs, elevators, toilets and parking space. Another requirement is the separate services area, so the goods can be taken to the shops away from the shoppers. For lack of that, most malls now can only restock before or after closing time.
He also described Kurdistan as an immature market for shopping malls where most are not controlled by the same persons or groups as those who built them. “In mature markets, malls get developed, built and marketed by the same company. So there is a hundred percent control over what brands there will be, which shops and how much, and what is the retail mix.”
This planning of a mall, which is essential for success, hardly has happened in Kurdistan. As most investors did not have enough money to keep the project in one hand, they sold part of the spaces in their mall even before the building phase. This had big consequences for the management of the mall, which as a result sometimes has to deal with as many as 150 different landlords.
In some of these malls up to 60 percent of the spaces are empty. “The owner does not care, he has already cashed out. The lack of cohesion and of strategy is killing for the mall. When the tenants don’t do well, neither will the mall as a whole.”
A solution will not be found in attracting international brands, Carnegy says. Although they want to come to Iraqi Kurdistan as their jumping board to the bigger market of Iraq, they will not be interested in these kinds of malls. One of them, the Sofi Mall, for that reason has already been changed into mainly offices, and others probably will follow suit.
Same as in building development in general, Kurdistan has only shopping malls of B- and C-grade quality. “Why do those who build malls not look at the more developed markets and learn?” Carnegy wonders. He sees a clear gap in the market for A-grade malls, of which the first is planned to be built near Erbil airport this year.
Kurdistan’s second city, Sulaimani, is behind on the mall development, with both Majidi and Family Malls being built there at the moment, and a number of smaller ones functioning in the city center.
The Family Mall in Erbil probably is one of the most successful of the region, with some 30.000 visitors a day. Part of that is due to shoppers coming from the rest of Iraq. Kurdistan does not have a shopping mall tradition yet. The malls are mainly frequented by Kurdish youth and expatriates, Carnegy says. The older generation still shops in the bazaar and in their neighborhoods. “For them a visit to the mall is an expedition.”
He predicts that change will come, like it did in Dubai, where shopping malls now are part of the social life. “They will become the meeting place for the family. But it might take a generation to change,” he thinks. “We have a growing young generation and rising GDP (gross domestic product), so the demand will grow.”
To be able to play that role, malls elsewhere add cinemas, ice rinks and ski slopes. Some of the Kurdish malls also make that combination, with a fun park and cinema, and these seem the more successful. Carnegy says: “When something makes it unique in comparison with the competition, the mall can attract more big brands and will be able to raise the rent.”
Even though many malls are half-empty and hardly surviving, plans known to IKG for new malls would mean a 275 percent increase in the shopping center supply over the next four years. It will take the supply of shopping center retail space up to 745,000 square meters by the end of 2017.
Carnegy calls that amount “moderately scary,” concluding that it will lead to “a massive oversupply.” This means huge empty spaces in the shopping malls.