(Bloomberg) –A desert city of gleaming skyscrapers and wealthy foreigners accustomed to packed, air-conditioned shopping malls, Dubai has developed an unexpected problem in recent years: empty storefronts.

This 1,600-square-mile oasis of commerce has dozens of malls where visitors can shop while keeping cool. The fancier ones boast marble corridors lined with luxury retailers and restaurants. Huge movie theaters, electric vehicle charging stations and health clinics are among the offerings meant to keep consumers inside and spending. At Dubai’s top-tier “destination” malls, there’s even an aquarium and an indoor ski slope.

But in the five years since oil prices fell from three-digit highs, this metropolis has been hurting. Its breakneck pace of commercial and residential development outstripped demand, and a strong dollar has made everything more expensive. Property prices across the United Arab Emirates have declined by about 27% since 2014, and the U.A.E.’s annual growth rate is now below 2%.

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Still, enough new retail construction is expected over the next two years to fill more than three Mall of Americas: 16.5 million square feet, according to consultancy JLL, increasing the amount of retail space in Dubai by about 40%. Destination malls and local shopping centers serving its 3.3 million inhabitants are holding their own. The weak spot in Dubai’s retail sector—which makes up 26% of its gross domestic product—turns out to be its many regional malls. And whether additional planned megamalls will be economically viable remains an open question.

According to David Godchaux, former CEO of Dubai real estate consulting firm Core Savills, the sluggish economy is hitting the middle tier of Dubai’s malls, which are also vulnerable to a growing e-commerce presence in the region. While the big and small retail venues may be doing just fine, Godchaux said, “anything in between is actually struggling.”

Building more retail in Dubai used to make perfect sense. A decade ago, when real estate analyst Simon Kennedy arrived from the U.K., he said he was shocked by how lucrative the city’s malls had become.

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“It was the easiest job for the in-house leasing team,” said Kennedy, who had decamped from Britain for a job with a Dubai developer. “They’d have a waiting list of 20, 30, 40 different types of tenants who just wanted a slice of it.” Sales were so good, he said, that landlords “could increase the rent by 10, 15% and they probably wouldn’t even notice.” Tenants happily paid their mall’s various service charges and marketing fees while even decorating their shops to the owner’s standards, Kennedy said.

By 2013, with oil topping $100 a barrel, Dubai was picked to host the 2020 World Expo. At the time of its selection, analysts were predicting annual growth would top 10% by the time the event began. With money pouring in and the prospect of more to come, Godchaux said it didn’t take long for other developers to pile on.

“The big malls were full, and many developers thought, ‘OK, great. I’m going to build a mall, and it’s going to be full as well,’” Godchaux said. “It doesn’t work like that.”

When the price of oil headed south, the tide of money began to recede. Now, unfinished buildings dot the Dubai skyline. Hussain Sajwani, chairman of Damac Properties PJSC, recently warned that all new home construction needs to stop for up to two years or Dubai will “see a disaster.”

In retail, about 19% of store space was vacant in the third quarter, up from 12% two years earlier, according to JLL. Rents have been falling by double digits since 2018. In September, the consequences of the building binge were on stark display in the city’s financial heart. Where tall buildings connect to a new $272 million retail corridor with space for about 200 stores, only two dozen were open. (Representatives of Dubai Tourism didn’t respond to a request for comment.)

So, given this landscape, why would Dubai need the equivalent of three more Mall of Americas?

Godchaux explained that some developers have chosen to finish projects because, unlike a residential development, mall projects are difficult to scale back. “A mall is a mall or nothing; it’s zero or one,” he said. “Sometimes, because you’re very, very close to completion, it’s probably more beneficial to finish it.”

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Alain Bejjani, chief executive of Majid Al Futtaim, which owns Mall of the Emirates, added that some development decisions were made before the full picture of Dubai’s slowdown came into focus. “Some projects that may have started in a different world [are being completed] in a world that has changed fundamentally,” he said.

The city’s flagship malls remain popular and profitable, though. The Dubai Mall, one of the largest in the world, fueled a 6% rise in profits for owner Emaar Malls in the first nine months of 2019. Emaar said it’s planning more retail space to match “strong demand from both retailers and visitors.”

Developers do appear to be pulling back on some new construction, however.

Nakheel, the government-owned company that developed Dubai’s artificial palm island, won’t start leasing at its giant Deira Mall for at least another two years, according to a person familiar with the matter. The mall was supposed to include 4 million square feet and open in 2021. Rebecca Rees, a spokeswoman for Nakheel, declined to comment.

The government of Dubai, meanwhile, is taking steps to firm up the city’s property market. In September, the emirate’s ruler, Sheikh Mohammed Bin Rashid Al Maktoum, said a committee would balance property supply and demand to ensure that “semi-government real estate companies in Dubai won’t compete with private-sector investors.”

There are some signs that a turnaround may be coming. In April, Warren Buffett’s real estate brokerage opened an outpost in Dubai, and in September, government-owned Meraas Holding announced a $1.4 billion joint venture with Brookfield Asset Management that aims to take over some of the developer’s properties.

Additionally, heavy discounting by retailers in the face of weak demand has pushed up Dubai’s new order growth, which improved for the first time in five months in October and spurred greater hiring, according to IHS Markit.

Any broader recovery in the city’s retail sector may very well begin online. Internet shopping was 4% of the U.A.E. retail market in 2018, compared with 15% in the U.K., according to market-research provider Euromonitor International. But those numbers may soon rise: EBay and Amazon recently entered the Dubai market, partnering with local companies Noon.com and Souq.com.

The Chalhoub Group, one of the largest luxury retail operators in the Middle East, recently terminated as many as 1,000 workers across the company. But in a nod to the growing presence of e-commerce, the company hired about 1,000 new employees in part to expand its online footprint.

“This will challenge all of us,” Chalhoub Group CEO Patrick Chalhoub said of Dubai’s changing retail economy. “There will be some casualties—a lot of casualties.”