With increasing supply coming from on-going retail space developments in major and second tier cities in the next six months, expectation is high that rents which at the moment, stand at US$65/sqm/month will remain stable as the increasing supply meets existing demand.
Investors have in the past 12 months alone, staked about $570 million in the development of retail centres in three different cities of Nigeria, which Obinna Okonkwo, Managing Partner at Pupple Capital Investment, says is just a fraction of the over $200 billion that has so far been invested in the sector.
Development outlook for the retail sector in Nigeria is quite positive, with no signs of slowing down, despite seeming macro-economic crisis that has slightly affected investor-confidence in the economy.
About 82,000 square metres of the retail pipeline are expected to be delivered in 2015 and among the expected deliveries are such developments as the Jabi Lake Mall Abuja which brings a new level of quality and attention to detail yet to be seen in Nigeria.
Other developments that will bring new supply to the market are the Festival Mall in Festac Town, Maryland and Osapa Malls, all in Lagos, which are collectively developing the retail space further, by providing municipal focused retail and growing retail activity in these nodes.
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The sector is however, not immune to the impact of the devalued naira and the oil price fall in the international market. “Despite the impressive level of progress being made, the rising value of the dollar puts retailers in a difficult place”, notes Gavin Cox, Retail Portfolio Executive at Broll Nigeria.
Cox, who made this observation in his company’s Q4 2014 report on the retail Sector in Nigeria, pointed out that though the effects of the falling oil price might not be felt immediately, in the near future, retailers would have to navigate their way through the impending rise in operating costs and difficulties.
The retail market in the final quarter of 2014 remained relatively buoyant, the report added, saying that despite the current economic climate characterised by negative indicators, retailers in key hubs were able to sail through, given the slight boost in retailer traffic during Christmas/holiday period.
“We anticipate that investors in the retail segment remained keen as current setbacks do not take away attractive demographics, including rising urbanisation rates and a rapidly growing population”, Cox advises, adding that net average achieved rentals in Lagos and Abuja were stable at 65sqm/month and 55sqm/month.
It is expected that in the next three to six months, supply will begin to rise, once on-going developments are completed; demand is expected to grow as international interest rises, while vacancy rate is expected to fall as demand for property increases.
Earlier, Muyideen Dosumu, a research analyst, had noted that despite strong interest from both international and local retailers on entering the retail market, Q4 saw relatively little shifts in existing tenants with most of them keen to take advantage of the increased retail activity for the festive period.
“The likes of Max and Vlisco opened in Ikeja City Mall and Celio in The Palms Lekki, Lagos respectively. Besides these transactions, the malls retained, for the most part, the same tenant ratio”, he said.
According to him, most of the present interest is being driven by Middle-eastern franchisees keen on making a big entry into the market with a host of brands, adding, “we expect that in the near future, the South African investment in the country will take a back seat to the growing Middle-eastern investments that have a wider global reach”.
CHUKA UROKO
