The number of empty stores at shopping malls in Nigeria is growing, mirroring the deteriorating state of the economy, as a large portion of the country’s 200 million people live in poverty.
Landlords are gnashing their teeth because beleaguered tenants, struggling with rising rents and service charges, are finding it difficult to honour obligations.
Consumers have also refused to open their purse strings, which means retailers are losing money.
Sources tell BusinessDay that service charge (cost of maintaining the building) alone is eroding the profitability of retailers, and that the huge chunk of shoppers at the malls, especially Shoprite, are low-income earners who buy basic food items.
“The economy doesn’t support growth and a lot of companies are closing down due to high cost of production. We don’t have the amenities and tenants can hardly survive,” said Otukoya Abiola, centre manager, Leisure Mall in Surulere, a Lagos suburb.
“Next year will be tougher because the VAT increase will result in increased price of diesel, which means the service charge will further go up. The service charge would have gone down if there was no need to run the generator,” said Abiola. Abiola said that landlords bear the burden of overhead cost so that tenants can stay.
“It is another form of subsidy,” he said.
Service charge costs as much as N120,000 and N150,000 per store but it has been increasing every year.
A total of nine stores at Shoprite in Surulere are under lock and key, and in some of them the vacant spaces are large enough to take two offices. The stores are on the same floor with KFC Foods, but the 26 stores at Leisure Mall are occupied.
A recent visit to the Apapa Mall showed a total of 19 stores are closed, even the cinema hall has been sealed. Some of the top brands that have evacuated include Ruff and Tumble, Samsung Phones, and Cash and Carry.
Experts attribute the vacancies in Apapa to the menacing gridlock in the city as a lot of high-end earners have relocated to other parts of the city, while those that stay very close to the city rather go shopping in other malls or conventional markets.
“Even if economic activities pick, the gridlock will continue to discourage people from coming here to shop,” said Adebukunola Taiwo, an architect and head of the Apapa Management Office of the mall.
Over a decade ago, Nigeria was at the cusp of an economic boom as investors had wagered that the country’s rapidly expanding middle class, and a copious young population that craved for consumption, would spur growth.
Developers began to respond to the aforementioned environment and optimism by building American-style shopping malls, home to famous brand names, movie theatres and large supermarket chains.
In short, Chinese developers and other Asian investors were looking to invest in the country’s malls.
However, the economic recession of 2016 stoked by a severe dollar scarcity that paralysed business activities have crimped consumer spending, and the once thriving malls are now a shadow of themselves.
Unemployment rate is at an all-time high of 23 percent, and to further exacerbate the already anaemic situation of consumers is the devaluation of the currency.
The country’s economy has been growing sluggishly as GDP slowed to 1.94 percent in the second quarter, compared to the 2.10 percent expansion in the first quarter of the year.
Dolapo Omidire, lead researcher at Estate Intel, said investors would have to build less elaborate and smaller malls of around 7,000 square metres – around half the size of typical large malls – and simply focus on delivering space at affordable rates.
“If I build a $100 million mall and people are showing up just to take pictures, then it’s a big problem,” said Omidire, in a recent interview.
Experts say an optimal mix of tenants could attract traffic to malls and that people shouldn’t be selling identical products. Malls in the United States, Asia and the Europe house recreational centres, big parking lots and lounges to relax.
“There has to be banks, a nice car space, hyper supermarket where people can get what they want, and saloons,” said Abiola.
There are still potentials in the Nigerian retail industry as consumers are price-sensitive and they crave for shopping.
According to Nielsen Shopper Trends syndicated study, Nigerians shop 30 times per month and they want value and assortment when they shop.
BALA AUGIE
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