Creating Next-Level Destinations
McARTHUR Retail Development Specialists is a company that provides comprehensive advisory, retail planning and leasing services to owners of retail developments across the globe. Here, we speak with Phil McArthur, Founder & Chairman, Vythnathan Mahalingam, COO and Chetan Kothari, CFO to learn more about the business and how they continue to push the boundaries in retail destinations around the world.
Founder & Chairman
COO
CFO
McARTHUR Retail Development Specialists (MRDS) assists developers and retailers across a variety of stages, from concept design to assessing new properties, to providing solutions for developments that are under-performing and require in-depth analysis and solutions. The firm’s comprehensive services include competition analysis, demand and supply research analysis, site analysis, retail real estate management, marketing and leasing services and other vital turnaround solutions.
The first individual at MRDS we had the opportunity to speak with was Phil McArthur, Founder & Chairman of MRDS, who has over 40 years of experience in the retail development industry. McArthur began by explaining that the need for curated and well-planned retail destinations has never been greater. When discussing global market trends, McArthur acknowledges that while e-commerce has taken a percentage of market share away from physical retail stores, the majority of retail consumption still occurs within physical retail shops.
Today the business is currently working on over a dozen active projects across the MENA region. These include masterplanned communities such as Jeddah Central, Masar in Makkah and Reem North in Abu Dhabi to the repositioning of mega malls like Granada Mall in Riyadh or Mall of Dhahran in the Kingdom of Saudi Arabia. Phil comments that the company is also fortunate to provide strategic advisory services to amazing projects like the Hann Reserve luxury resort in the Philippines.
“When we speak with developers of retail destinations, the first thing we want to understand is their catchment area and the retail potential of the area. Analysing and agreeing to the competitive position of the new mall or centre is of critical importance. Developing the correct balance between everyday convenience shopping, comparison brands such as fashion and leisure and dining is both an art and a science.”
Phil firmly believes the science is in the market analysis and business plan and the art comes from the team’s experience in leasing and managing leading properties and understanding that each scheme requires its own unique merchandise mix.
So what areas would he focus on when revitalising under-performing malls?
“Firstly, we look for a fresh competitive position for the asset through renovation, adding anchor stores, F&B destinations and other attractions. Secondly, we suggest design improvement for each mall that may improve circulation issues and thirdly we provide advice on operating and marketing improvements that will help get the retail project back in the limelight.”
We next turn our attention to the recently appointed COO Vythnathan Mahalingam who opens by saying that with the wide variety of projects that they are currently assisting, there is clearly a need for well researched pragmatic strategies for designing, leasing and operating first-class properties.
“Given my hands on experience in leasing and asset management of retail developments over the past 20 years, I am particularly excited to expand our retail leasing capacity within the MENA region and service our clients more effectively to maximise their income potential.”
As the topic of conversation moves onto effective strategies in maximising foot traffic and tenant satisfaction, Mahalingam explains that footfall is not solely the most important factor, the conversions and densities that their retailers are making in the respective store located within the asset also come into play. He continues by saying that they must focus on creating destinations that are meaningful to their customers from the moment they arrive in the mall to the time that they leave and that today, F&B is key to having guests come more often and stay longer. Entertainment is also vital to provide additional reasons for the customer to visit.
As a key driver for growth at McARTHUR, what innovations in retail development and leasing does the COO think will become the new standard in the industry over the next decade?
“Firstly, new technologies will impact how we study our markets; design our malls and how people will shop. Secondly, we will continue to see more non-retail real estate added to strong shopping centre sites that will result in a more mixed-use proposition. Thirdly, we will continue to see changes in shop formats. For years the department store was the darling of the industry, today it has been replaced by fast fashion giants like Zara, H&M and Uniqlo.”
For the final part of the interview, we speak with Chetan Kothari, CFO of the business and begin by asking about the financial trends being seen after the instability of the last few years.
“The Middle East retail real estate industry is seeing several key financial trends as it emerges from the pandemic. Driven by economic recovery and government stimulus packages, demand for retail spaces in the region is increasing, particularly in high-growth markets like Saudi Arabia and the UAE.”
Kothari goes onto say that retail developments must focus on cost efficiency in the early stages by implementing smart building technologies and energy-saving initiatives, for instance using automated systems for lighting, HVAC and maintenance can reduce utility and operational costs. It is these savings on operational expenses that can free up capital for reinvestment in future phases and upgrades, creating a balance between manging immediate costs and sustaining profitability long-term.
So what financial indicators or metrics does the CFO prioritise when evaluating the potential success of a new retail or mixed-use development project?
“When evaluating the potential success of a new retail or mixed-use development project, several key financial indicators and metrics are tracked, such as net present value (NPV), internal rate of return (IRR) or return on investment (ROI) to name just a few. For retail and mixed-use developments, achieving a high occupancy rate is crucial to maintaining steady cash flow. Early pre-leasing agreements – especially with anchor tenants – can provide financial security, signalling demand and mitigating vacancy risk. Finally, monitoring the cost per square foot (both in terms of construction and operational expenses) is essential for keeping the project within budget. This metric helps in pricing retail spaces competitively and benchmarking against marked norms.”
As our time with the team nears its end, Phil comments that over the past 20 years we have seen tremendous sophistication in the planning, design, merchandising and operating of retail destinations globally.
“Today we can visit shopping centres on every continent except Antarctica and witness stunning placemaking, beautiful architecture and wonderful retail brands and F&B services. The shopping centre industry is truly a global phenomenon.”
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