Cinemas expected to boost footfall in Saudi Arabia’s malls

Saudi Arabia’s recent move to allow commercial cinemas in the Kingdom will boost the retail sector, and mall operators and developers are already considering measures to include movie theaters.

“Retail real estate developers are already working with architects, consultants and cinema operators to see how their projects can be modified to accommodate cinemas,” Phil McArthur, managing director of shopping centers specialist firm McArthur+Company, told Argaam.

The Saudi Ministry of Culture and Information on Monday announced that it has started the process for licensing cinemas in the Kingdom. The first cinemas are expected to open as early as March next year.

The measure, which comes as part of the Vision 2030 reform program, will likely boost economic growth and diversification by contributing more than SAR 90 billion ($23.99 billion) to GDP.

The ministry expects 300 cinemas, with 2,000 screens, to open by 2030, creating more than 30,000 permanent jobs and overn 130,000 temporary jobs.

In a statement to Argaam, Majid Al Futtaim, which owns and operates Dubai-based VOX Cinemas, said it will work with the Kingdom to “extend the footprint” of VOX brand to Saudi Arabia in the months ahead.

“Today’s announcement will mean the creation of thousands of job opportunities for Saudi nationals through the creation of another new leisure industry in Saudi Arabia and we look forward to playing an active role,” VOX Cinemas said in the statement.

Nezar Almugren, chief executive of Riyadh-based Retail Real Estate Co., told Argaam that his firm has been considering ensuring space for movie theaters at the open-air malls that are in the pipelines in Riyadh, Khobar, and Jeddah.

Almugren, however, expects the impact on entire retail sector to be limited. “Footfall will definitely increase; but the increase will not show a similar growth in retail sales, since most of the extra spending will be focused on entertainment activities in the malls,” he said.

“Actually, it may hurt retail sales in the short run since it's directed to cinemas,” he added.

On the other hand, McArthur said addition of attractions to any shopping center will result in higher footfall and sales for the mall.

“Our studies clearly indicate that mall sales and footfall increase with the addition of entertainment anchors. Most major malls in KSA feature large format family entertainment centers and the addition of cinema facilities is a natural fit,” McArthur said. 

If it translated into increased sales, the move could also impact rents at malls allowing operators to demand higher rents, McArthur said. This, however, will likely take longer time to show.

The cinema industry, however, will still need to navigate the challenges of strict regulations and censorship.

“Too much censorship on movies content would render many fills without real value or substance,” Almugren said.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com