• Sunday, May 19, 2024
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Investors tap into new cities in mall development

new dimension to the growth of the retail segment of the property market in Nigeria is fast evolving, with local and international investors shifting focus from the traditional cities of Abuja, Lagos and Port Harcourt to other locations where demand and consumer spend are seen to be growing.

The last couple of years have seen these investors and retailers in cities like Enugu, Ibadan, Ilorin, Kano and lately Efurun and Owerri, where Resilient Africa is developing two malls with strong determination to open for business in March and December 2015 respectively.

Other cities enjoying such development include Asaba, Abeokuta, Lafia, Ikorodu.

The country’s  retail market continues to record strong annual growth and from $106 billion in 2011, retail sales have risen to $160 billion in 2014 , making Nigeria the largest retail market in Sub-Saharan Africa,  surpassing South Africa.

It is expected that by 2016, retail sales would reach $198 billion.

The rising disposable income of the population will continue to attract international companies, and world class retailers such as Carrefour and Pick n Pay are keen to enter the market. The market has seen a major shift from the purchasing of essentials to more income elastic items, which is a major attraction for the planned entry of many brands that relate well with Nigerians.

“Over the next five years, retailers such as Zara, Gap, and Tommy Hilfiger will proliferate in the marketplace”, says Michael Chu’di Ejekam, director, real estate, at Actis, a private equity investment firm with $7 billion under management.

Driven by factors including a large population, growing sophistication and rising purchasing power among the middle class , the retail market in Nigeria is undergoing what Ejekam has likened to a revolution, swelling investment appetite and satisfying hunger for modern and convenient shopping experience among consumers.

The softening of the economy of the developed countries has also caused many international investors to look towards Africa, especially Sub-Saharan Africa, often described as a greenfield with unlimited growth potential and investment opportunities.

“I think Africa is the flavour of the moment and it is only natural for international investors to migrate to the continent”, says Japie Swart, Resilient Africa’s Chief Operating Officer (COO).

Actis,  with about US$1.7 billion (N272 billion) investments in Africa already has footprints in this sector, with interest in the 307,000 square metres  Ikeja City Mall in Lagos, estimated to have cost US$100 million (N16 billion), the Palms in Lekki, Lagos, and Jabi Lake Mall in Abuja, still under construction.

A joint venture with Shoprite and Stanbic IBTC as development partners, Resilient Africa is a real estate investment and development company from South Africa, intending to develop as many malls as it can, within the shortest possible time in Nigeria.

Swart says  their focus is on the southern states of Nigeria besides the major cities of Lagos and Port Harcourt.

“Wherever we see opportunity, we pursue it. All of us cannot just focus on the big cities. By doing that we will be over-supplying the market there, but not tapping the opportunities in the rest of Nigeria”, Matthew Chency, the company’s project manager, explained, pointing out that  their choice of locations is based on available business opportunities and market research.

Lilian Agbakoba, the CEO of  Berverly & Sam Properties,  developers of Purplestone Mall in Apo, a suburb of Abuja, had disclosed to BusinessDay their plan to develop malls in Asaba, Abeokuta, Lafia, Ikorodu and other locations, with the aim of reaching middle income earners who also hunger for a modern shopping experience.

Ejekam observes however, that a major hindrance to this ‘revolution’ would be the ability of brands to secure local franchisees or joint venture partners, adding that at the moment there are only a few local players with the expertise and the financial wherewithal to fund working capital to rollout stores.

He  and Swart are agreed that finding the right size of land at the right price and location is also a huge challenge, which in itself is a huge opportunity for real estate developers and savvy investors.

In spite of these challenges, Shoprite, the South African retail chain, says part of its pipeline developments is to open 15 new shopping outlets in various parts of Nigeria in the next 36 months.

This is  in addition to the existing eleven, four of which are in Lagos alone—Lekki, Ikeja, Festac and Surulere.

An official of the company who disclosed this to BusinessDay at a forum in Lagos said their long term plan was to develop their own mall, adding that their activities in Nigeria were impacting positively on the country’s economy, through the primary and secondary jobs they create and the farmers produce they stock in their shops, among other things.