According to a retail rent index by property consultancy CB Richard Ellis, the cost of leasing a new store fell by 11 per cent in Dubai and 3.5 per cent in Abu Dhabi in the first quarter of FY'10 compared to that in same period last year.
Mark Morris-Jones, CBRE's senior director for retail and industrial property for MENA, said this was the first reduction in rents in 10 years and reflected the decrease in retail sales caused by the global economic downturn.
Rental rates remained at 400 dirhams ($108.9) a square foot in Dubai, while 280 dirhams a sq ft in Abu Dhabi.
"Demand is fuelled by their expectations of business and how they expect to do in terms of sales," Morris-Jones said.
"And if their expectations, given the way the market is in the moment, is that they are not going to do so well, they are not going to have a demand for retail property."
Reports suggested that Dubai is expected to have 4.25 million square metres (sq m) of retail space by next year, up from 1.17 million sq m in 2006.
In the past eight months at least four malls have opened in Dubai, including the 1.12 million sq m Dubai Mall, considered one of the world's largest malls.
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