Middle East shopping malls are rapidly evolving from landlords that lease retail space into digital, data-driven platforms where customer experiences, artificial intelligence and retail media could become more valuable than rent, according to a new Boston Consulting Group report.
The report, Imagining the Future of Retail: Beyond Space, argues that the region’s retail real estate industry has reached an inflection point as GCC countries continue expanding retail space while consumer behaviour shifts rapidly toward online shopping, omnichannel commerce and AI-assisted purchasing.
“The next decade will reshape retail more profoundly than the last three combined, and current development and operational models are not equipped for what is coming,” the report says.
BCG warns that traditional space-centric business models are becoming increasingly inadequate as five forces transform the economics of physical retail: e-commerce growth, omnichannel ecosystems, experience-first consumer expectations, retail media monetisation and AI-driven discovery.
The consultancy says the gap between winners and losers is already widening.
“Up to 25% of revenue at leading assets comes from non-GLA sources,” the report notes, adding that “assets that lack digital and data capabilities risk becoming invisible to future customer journeys.”
Competition is intensifying as Saudi Arabia, the UAE and Qatar continue investing heavily in new retail destinations, mixed-use developments and tourism infrastructure.
“The implication is clear: scale and design alone are no longer sufficient,” the report says. “Assets that deliver clear positioning, differentiated experience, seamless accessibility, and strong tenant economics can continue to outperform. Those that rely primarily on location or size face growing performance dispersion as capital deployment accelerates.”
Digital retail shift
BCG says interviews with senior retail and real estate executives across the region identified three disruptive scenarios that developers believe are likely within the next five to 10 years.
The first is a future where more than half of retail sales move online.
“In a scenario where online penetration exceeds 50%, retailers require dramatically less physical space,” the report says. Stores would increasingly become showrooms supported by fulfilment centres, returns facilities and last-mile logistics.
One GCC executive quoted in the report said: “We’re seeing stores shrink and become more like showrooms. The real work happens behind the scenes.”
Another added: “Fast delivery expectations mean dark stores, pickup bays, and micro-warehousing have to be part of the plan.”
The report also predicts that data could replace product margins as retail’s primary value driver.
“The power will sit with whoever can connect the data across journeys,” one industry leader said, reflecting the growing importance of customer insights over traditional retail margins.
BCG says retail media is emerging as another major revenue opportunity.
Global retail media advertising revenues grew from $90 billion in 2021 to $144 billion in 2024, are estimated to have reached $164 billion in 2025, and are forecast to rise to $213 billion by 2028, according to the report.
One GCC executive described its potential in stark terms: “Retail media can be as important as rent. In some cases, it could even reach 20% of a centre’s income—that’s how powerful attention has become.”
Another added: “If you can deliver the right audience, through events, sports, and entertainment, brands will pay for access. The monetisation potential is far bigger than most developers realise.”
AI changes shopping
The report also sees artificial intelligence fundamentally changing how consumers shop.
Leaders interviewed believe AI agents could soon become primary decision-makers for shoppers, comparing products, evaluating prices and directing customers toward both physical and online stores.
BCG notes that more than half of consumers under 34 already use AI during shopping journeys, while 75% of retailers expect AI agents to become essential to customer experience within five years.
“We’re experimenting with heat-mapping and targeted digital offers in-store. It’s early, but you can already see the uplift in engagement,” one GCC retail leader said.
Another acknowledged the industry’s preparedness remains limited: “AI will change how people navigate retail, but we’re not ready yet. The capabilities, the data structures, the digital twins, it’s all still in its infancy.”
Experience drives growth
The report argues that malls must increasingly compete on experiences rather than transactions.
“People don’t come just to shop anymore. They come to stroll, socialize, and spend time. The experience has become the core product, and we need new ways to create and monetize the experience,” one executive said.
Food and entertainment are becoming increasingly important.
“Food—and family entertainment—is becoming the anchor. In some new destinations, F&B could end up representing half of the mix because that’s what drives dwell time.”
Summing up the industry’s future, another leader told BCG: “The future looks more like a town square, blending food, wellness, sport, and retail into one integrated place where people want to be.”
Rather than converging on a single model, BCG says three retail archetypes are emerging across the Middle East: community and convenience centres focused on accessibility and efficiency, experience-led destinations centred on leisure and entertainment, and ecosystem platform developers that extend value creation through data, digital services, logistics and media.
The consultancy cautions against trying to pursue all three simultaneously.
“Performance depends on having a clear primary intent,” the report says. “Assets that attempt to pursue multiple archetypes without prioritization often struggle to align design, tenant mix, operating model, and investment focus.”
Despite broad agreement on the direction of travel, the report says organisational readiness remains the industry’s biggest challenge.
“Everyone talks about data and AI, but almost no one is building the foundations,” one executive admitted.
BCG concludes that developers must shift “from delivering space to building operating models,” warning that “those who do will shape the next chapter of retail real estate in the region; those who do not will be forced to react to it.”
