Amid the present challenges in the economy, there are some levels of opportunities such as the incentives now offered tenants/retailers by landlords which have brought some excitement into the retail market.
Expectation is high in the retail market that, on the leasing side, a tenants’ market is likely to gradually emerge over the next 12 to 18 months, and as uncertainty in the economy, fuelled by tight regulations and currency issues, continues to pose challenges to the market, incentives offered by landlords will increase.
“Landlords are likely to go further than allowing tenants longer payment periods for security and fit-out deposits to offering even longer rent free periods”, says Opuda Sekibo, a researcher at Broll Property Services Limited, explaining that “the adoption of this practice is informed by the need to attract retailers from the limited tenant pool to existing and upcoming malls and in light of the significant increase in supply across the market”.
Broll, a subsidiary of Broll Property Group South Africa (Pty) Ltd, is Africa ́s leading commercial property services group, founded in 1974 and now with offices throughout South Africa and a growing number of African countries including Nigeria, Ghana, Kenya, Malawi, Mauritius and Namibia.
In its Q4, 2015 report on the retail market made available exclusively to BusinessDay, Sekibo says that given the immense pressure facing the currency, any correction of the official interbank rate to better reflect the going market exchange rate will cause upward pressure on effective rents, explaining that “this is due to the practice of pegging rents, quoted in dollars but payable in naira, at the prevailing interbank rate”.
He hopes that, going forward, the push back against asking rents will continue as retailers consider the heightened possibility of a further devaluation of the naira.
In the last 12-18 months, many retail mall projects were started and it is anticipated that over the next 12 to 24 months, 183,500 square metres of retail space will be completed.
Sekibo estimates that 66 percent of these mall completions will be delivered to core markets including Lagos which will be receiving 79,000 square metres and Abuja which is to get 43,000 square metres. “The other expected retail space will be delivered to locations including Ogun, Cross River, Niger, Delta, Imo and Anambra”, he says.
Femi Akintunde, MD/CEO, Alpha Mead Facilities Management and Services, had in an interview with BusinessDay, noted that there was a glut in commercial real estate, including retail, at the moment because demand was weak.
“There will be less development activities in this space in 2016 except those that have been started and a number of them are retarding in progress. Projects are being suspended because the budgets that they started on that made them viable are no longer sustainable. Promoters of those projects have slowed down”, he said, adding that many new developments may not be seen this year.
Akintunde whose company is managing the massive Ado Bayero Mall in Kano, recalled that the retail market was turning out to be a good story last year, pointing out that “this year it is going to face real challenge; it was one area of real estate that was well celebrated last year. About $48 billion was invested in retail business last year and it was growing”.
According to him, most of the retail projects that were started before now were experiencing challenges, explaining that the level of patronage was dropping because the middle class that was the key customers have had their earning capacity reduced.
CHUKA UROKO
