…Growth of retail stores driving community malls
Developers are attracted to community malls, also known as superstores or neighbourhood malls, due to their lower construction costs as they ignore the expensive formal retail segment (big malls) of the market.
As a result, community or neighbourhood malls are experiencing exponential growth, driven by tenant/consumer preferences and the growth of retail stores.
In the last five to 10 years, most of the Grade A or big malls have seen vacancy rates in the cities, especially Abuja where Wuse Novare, Apo 2, and Silverbird appear to be struggling.
According to a recent report published by Northcourt, the three malls have recorded 17 percent, 15 percent and 21 percent drop respectively. The report noted that since Shoprite’s departure, they have seen a sharp decrease in foot traffic and a rise in business closures or relocations.
Read also: Formal retail struggles as tenant, consumer preferences lift community malls
“Conversions in the larger Abuja real estate market have roared on, leading to increased supply of shops, offices, warehouses and Airbnb-style lodgings,” the report said, noting that the retail market has seen a significant shift towards the development of small-sized malls in communities and neighbourhoods, making shopping experience more convenient and much closer to consumers.
While Ayo Ibaru, CEO, Northcourt, said the growth and spread of community malls are a response to tenant and consumer preferences, Michael Chu’di Ejekam, CEO, Atreos, a retail investment holding platform, told BusinessDay that the economic slowdown and harsh operating environment have forced mall developers to design their facilities in a way that would not cost them much money and the off-taker problem.
“At the moment, investors are smart and are thinking of what sustainable rates in the market are. They are coming up with new approaches. What is of high consideration now is neighbourhood retail. Malls have come down to as small as 7,000 square metres as against large malls of 20,000-30,000 square metres,” he said.
According to Ejekam, there are three pockets of considerations that go into mall development, including consumers, retailers and investors, pointing out that an average household spends 60-70 percent of its monthly spend on food and beverages consumed at home.
He said that because of the challenge with power, people cannot afford to go out and buy large stock of goods and store them in the refrigerator, meaning that they have to go out frequently to buy their stocks.
“Again, there is low car ownership rate fuelling available ones in Nigeria, which means that shoppers cannot go far for their shopping. They want to be able to work short distances to do their shopping. All these have to influence the kind of mall that the developer has to put up. He has to create something within the neighbourhood,” he advised.
Read also: Why we chose airport duty free stores to retail our products – CEO Ogoo Leather
Ejekam noted that investors are also challenged by the high construction cost in Nigeria which, he said, is 2.5 percent higher than South Africa’s.
“What this means is that a $40 million mall in South Africa will cost 2.5 percent more in Nigeria.”
This development explains the widespread of the neighbourhood malls, otherwise called superstores, mostly in mid-income and low-income neighbourhoods such as Surulere, Gbagada, Ikorodu, Okokomaiko, Ikotun, Egbe, Festac/Amuwo Odofin, among other locations.
Besides their proximity to residential areas, the superstores are also offering affordable prices and discounts, which explain why consumers are switching from formal retail to Bokku Mart, Primemart, Prestige, Twin Faja, for their grocery needs, due to their discount sales.
The discount prices also allow retailers, comprising market women, to buy bulk and resell to their customers.
Bokku, for instance, which started operations on September 30, 2022, already has 75 outlets across Lagos Mainland. It was founded by Adewale Adeyemi, a business leader and entrepreneur.
Read also: Marketsquare expands presence in Lagos with launch of additional two stores
Many consumers attest to the fact that bread from Bokku has been their favourite and this is reflected in the long queues seen in the outlets. When it started, the bread was sold for N1,250, but retailers can buy in a dozen and resell for N1,500.
Oluwatobi Michael, a resident of Isashi in Ojo area of Lagos, said that since the Primemart opened along Lagos-Badagry expressway, his mother has stopped patronising regular retail stores close to them.
“My mother prefers to buy groceries and drinks from there. She enjoys the discount sales and has been leveraging the opportunity to get necessary things for the house,” he said.
