PRINT THIS STORY:

CHANGE TEXT SIZE:

PEACE MONGERS

Retail helps rebuild and revive war-scarred Lebanon

BY SASCHA BRODSKY

If the assassination in February of former Lebanese Prime Minister Rafik Hariri was a stark reminder of Lebanon’s 1975-90 civil war, ABC Mall attests to just how far this country has come since fighting stopped.

ABC Mall, Lebanon’s first European-style shopping center, has led a development boom that is helping Beirut reclaim its title as “the Paris of the Middle East.” War destroyed the café society and beach resorts that gave Beirut that reputation, but outdoor cafés are again dotting the streets of a newly rebuilt downtown filled with old men sipping tea and young couples wearing the latest fashions. Patrons crowd the stores and restaurants, and tourists flock again to this city on the Mediterranean coast.

ABC Mall, which opened in 2003 on a hilly street, took seven years to build and cost its developer, ABC Group, about $120 million. The 450,000-square-foot mall contains 170 shops and an eight-screen cinema. The partially open design takes advantage of Beirut’s roughly 300 days of sunshine per year.

“The mall is on a hill with a significant slope, so the advantage is entrances at different levels, and it improves the circulation of shoppers,” said the executive vice president of ABC Group, 35-year-old Robert Fadel, whose family owns 80 percent of the company. “But it made it difficult to design and build.”

The investment has paid off, he says. ABC Mall is nearly 100 percent occupied, with tenants including Chanel, Montblanc and Starbucks. The mall’s sales have increased since the Sept. 11 terrorist attacks on the United States, because of an influx of Middle Eastern tourists who, fearful of being marked as potential terrorists, declined to travel to the U.S. and Europe, Fadel said.

Tourism officials say the city’s cafés, nightclubs and beaches drew some 1.2 million tourists in 2004, up 30 percent over the year before.

Developers are taking note of that, of Beirut’s $1.5 billion retail market and of the fact that Lebanon’s gross domestic product grew from $16.4 billion in 2000 to $17.8 billion in 2003 ($5,000 per capita, the highest among the region’s non-oil-producing countries).

“There is a very strong demand for retail of all types in Beirut,” said Michael Dunn, head of local real estate consulting firm Michael Dunn & Co. “Some of the upper class go to Europe for high-end shopping, but in general there has just been a lack of places to go.”

The downtown-area development has revived what was a shell-pocked wasteland. Immediately after the civil war, nearly all stores opened outside the downtown, along the coastal highway. Most of the shopping centers erected that first year “were of indifferent size and lacking in critical mass to be truly successful,” wrote Simon Thomson, the principal partner of Retail International, a London-based consulting firm, in a report on Beirut.

Beirut was known as a city of high fashion before the war, Thomson told SCT. The Roman ruins, seaside setting and cosmopolitan population helped create a city similar in looks and spirit to Barcelona or Athens.

“Because of the relaxed atmosphere, people from around the Middle East would come to Beirut to play,” Thomson said. “That’s starting to come back — and the wealth along with it. You now have a lot of very upscale shopping, with brands like Armani and Gucci and the rest of the luxury brands. It’s the top of the middle end of the retail market that is still lacking, and that’s the niche that the ABC Mall fills.”

But till now, Beirut’s hills have made the building of large, American-style shopping centers difficult, Thomson says.

“Until the ABC Mall, most shopping centers have only been two or three levels and quite small,” he said.

Boosting Beirut
With the economy on the upswing and foreign investors showing interest, larger projects are now under way. Local development firm Solidere is building the $100 million Souks of Beirut, a 1 million-square-foot, open-air project going up in the city center. The project will include about 200 shops, a jeweler’s market, cafés, an art gallery and an archaeological museum.

Also under development is the Dora Regional Commercial Centre, in the northern suburbs, containing 750,000 square feet anchored by an outlet of BHV, a French department store chain.

These new projects will boost Beirut’s shopping center density from about 620 square feet per thousand inhabitants to roughly 2,500, and from 250 square feet per thousand to 570 countrywide, according to local consulting firm Ramco Real Estate Advisers.

The optimism implicit in all this new construction translates into high vacancy rates in the peripheral shopping areas, Thomson says, as many retailers move into the reconstructed downtown. Beirut’s total gross leasable area, currently about 2 million square feet, will probably hit about 5 million square feet by 2008, observers say. Retail space, meanwhile, averages about $100 per square foot.

The challenge for the Lebanese now is to maintain this progress even in the face of the recent turmoil. Hariri had helped narrow the rifts among the country’s many factions, and he spearheaded much of the economic growth.

The Lebanese need no reminders of how bad things got during the war. But the bullet-and-shrapnel-scarred buildings bear a sad and wordless testimony for visitors. During fierce fighting in 1982, mortar fire hit several buildings ABC Group owned.

“It was devastating,” recalls Fadel, whose father was running the company at the time. “We nearly lost everything.” But instead of fleeing, as many affluent Lebanese did, the Fadel family stayed in Beirut and later helped rebuild.

Dunn predicts that the bombing will “put off foreign investors at least for the short-term.” But Fadel says he thinks the bombing will ultimately “bring the Lebanese people together.”

Investors who have witnessed ABC Mall’s success are courting the company in the interests of doing projects elsewhere in the region.

“We are waiting to gauge the markets before we go ahead with these projects,” Fadel said. “But I see a brighter future for the Middle East.”