Retail Real Estate in Kuwait: The Real Estate Investor's Guide for 2023

Kuwait's real estate market, especially its retail sector, presents a lucrative investment landscape. The nation's robust economy and upscale living standards drive a strong demand for retail spaces. 

As an investor, it's critical that you understand the dynamics of Kuwait's retail real estate. This article offers a thorough analysis, tailored to savvy investors like you, uncovering the rich opportunities awaiting in Kuwait's retail property market. Don't miss out on these insights – they could be pivotal for your investment decisions.

Types of Retail Properties in Kuwait

1- Shopping Malls: These are properties with a high rental area (more than 10,000 square meters), housing a significant number of major brands such as "The Avenues" and "Mall 360".

2- Commercial Complexes: Properties with a medium rental area (less than 10,000 square meters) featuring a few tenants from major brands, like Al Hamra Commercial Center.

3- Restaurant and Cafe Complexes: Located primarily along the coastline, these properties mainly include restaurants and cafes, along with some other tenants, such as "Al Buhaira Chinese Restaurant" and "Sidra Restaurant Complex".

4- Mixed-Use Properties: These are properties with commercial units on the lower floors and office and other units on the upper floors, mostly found in Kuwait City, like Al-Awadi Tower, Crystal Tower, and Yal Tower.

Retail Malls vs. Retail Plazas‍‍

It's important to note the contributions made by shopping malls, as they have been one of the main drivers of market growth, particularly with the openings of Al Khiran Mall and The Warehouse Mall, both part of the Al Tamimi Group.

Lease Rate Dynamics and Trends in Kuwait

Let's delve into the key characteristics of the fourth quarter of 2023 in Kuwait's retail real estate market:

1- Decrease in Occupancy Rates and Increase in Occupied Spaces:

In 2023, the occupancy rate in retail property spaces reached 81.6%, which is lower than expected. However, this rate reflects a market on the path to recovery. The inventory of retail spaces rose from 1,492,465 sqm in 2022 to 1,637,872 sqm in 2023, an increase of 145,406 sqm.

2- Expected Occupancy and Rental Rates in Kuwait

3- Average Lease Rate Trend:

• The average lease rate in 2023 experienced a marginal decrease, going from KD 20.8 per square meter in 2022 to KD 20.4 per square meter in 2023.
• This trend suggests a relatively stable leasing market, with competitive rates remaining attractive to retailers and investors.

4- Supply Pipeline and Future Projections:

• Kuwait's retail space sector benefits from a relatively predictable supply pipeline, encompassing both confirmed and speculative projects.
• Confirmed projects include recent openings like Tamdeen Group's Khiran Mall and The Warehouse Mall, as well as upcoming developments in Eqaila and Tamdeen Square Phase 2. Construction updates in Jaber Al Ahmed City by Mabanee and Alargan are also noteworthy.
• Speculative projects, while promising, come with uncertain timelines, featuring developments such as Kuwait Motor Town and Mabanee's project in Salmiya, among others.

5- Projected Trends:

• Looking ahead, the retail space inventory is expected to continue growing, with a projected total of 1.91 million square meters by 2025.
• Occupancy projections indicate a steady increase, with an estimated occupancy ratio of around 84% by 2025, and a minimum of 81.0% in 2024.
• The lease rate trend is expected to see a slight decline, with the average lease rate projected to drop from KD 20.4 in 2023 to KD 19.8 in 2025.

Major Players in the Kuwaiti Retail Market

These major groups command a substantial market share of 36.7%, highlighting their significant influence in the Kuwaiti retail sector. Here's a brief overview of the top three among them:

1- Alshaya Group: A prominent player with a diverse array of brands in various sectors including fashion, food, and hospitality. Their extensive presence in Kuwait and the Middle East significantly impacts the commercial space sector.

2- Majid Al Futtaim: Known for their investments in shopping centers and retail outlets, this group focuses intensely on creating comprehensive retail experiences. Their presence enhances the overall landscape of the industry and contributes to the sector's growth.

3- Landmark Group: The group is renowned for its unique retail concepts, encompassing fashion, home, and electronics brands. Their influence extends to Kuwait, making them a key player in shaping the retail market.