Diesel outages deal a dreadful blow to shopping centers

Malls were roughly striving in the previous months to keep their doors opened for visitors, amid an economic collapse and currency deterioration, but the latest fuel crisis and severe outages in diesel have dealt a blow to shopping centers.

This dreadful reality has obliged some malls to take tough decisions. Last week, CityMall management decided to temporarily shut down the mall, due to the severe shortage in fuel despite vital attempts to secure it. The mall will resume activity when power is supplied again or diesel is available. Other commercial centers such as ABC have reduced working hours to cope with the crisis, while others have taken precautionary measures such as reducing energy consumption and turning off air conditioners.

Temporal crisis

In this context, Rony Aoun, Board member of the Middle East Council of Shopping Centers, and Chairman of SMAG SHOPPING MALL ADVISORY GROUP, told Sawt Beirut International (SBI): “The fuel crisis didn’t leave any other choice for malls, especially that malls require high energy for cooling and lighting, although each center has its own power generators and fuel reservoirs.” Aoun said this is a temporal crisis, and centers will return to normal and open their doors as soon as the fuel crisis is resolved.

Remarkable drop in footfall

Malls are witnessing a noticeable drop in footfall, but this will not lead, according to Aoun, to shutting down any mall. He said that the regional malls that visitors have to commute to it, and not just walk into it, will be suffering and experiencing less footfall than other malls due to the shortage in gasoline.

Brand mix afflicted

The consecutive economic crises along with Covid-19 repercussions have also impacted the malls’ brand mix. The Lebanese market was the main destination for luxury and high-end international brands, but unfortunately these brands are withdrawing the market due to the economic crisis, devaluation, and the unprecedented drop in the citizens’ purchasing power. In the previous months, the market has experienced the exit of many brands from the clothing and food sectors. Dareen International, a subsidiary of the Kuwaiti-based AlShaya Group, closed more than seven brands in Lebanon. Mike Sport also reduces the number of branches Recently, many companies such as Louis Vuitton, Golden Goose have shut down. Aound added that this is applicable also on Food and Beverage sector not only retail fashion.

Turkish brands will prevail

Aoun said that these international brands will be replaced by Turkish as well as local brands. “The noticeable movement of the Lebanese expatriates has boosted the malls and retail shops and their sustainability this summer.” He added that expatriates are spending in fresh dollars, and they have the financial ability and the will to support the locally manufactured products, that are of high quality and good prices, and this will help in sustaining the crisis.

Long time to regain confidence

In the midst of the crises, all malls have empty units and a drop in the Gross Leasable Area (GLA), as a result of the international brands that are withdrawing the market. In this context, Aoun said: “The malls need a long time before they be able to do a damage control on the brand and tenant mix. It will take very long time for the international brands that withdrew from the market to come back to the market, but no mall will shut down totally. He added that some malls have the financial budget, such as Centro Mall, and they are doing promotions and activities, because they are the newest players in town, and they are constantly and aggressively investing through social media campaigns and activities. Other malls are operating on day to day basis.