Though 2018 was a challenging year for the retail market, outlook for the sector in 2019 shows that investors and retailers have a number of factors, particularly oil price and local currency, to watch as the market struggles through an unfriendly macro-economic environment.
Of the various segments of real estate, retail seems to be the worst hit with growing vacancy rate, low tenant pool, shrinking footfall and falling prices per square metre, making it a real struggle for landlords to retain existing tenants and drive up occupancy levels.
The outlook for oil prices is one embedded in risk, according to a recent Broll-Property Intel retail market viewpoint. The firm noted that Goldman Sachs has cut down its oil price outlook in 2019 to US$62.50/barrel, from a
That has implications for the retail market because with the economy still heavily dependent on oil revenues to sustain economic activity, a slowdown in oil
It is estimated that 80 percent of Nigeria’s foreign exchange earnings still comes from oil despite government efforts at diversifying the economy. Looking at the size of the economy or the problem the government is dealing with, it will be seen that there is need to do something more dramatic and faster.
Besides oil price, Bolaji Edu, Broll’s CEO, says a possible devaluation in the local currency by year end could introduce transactionary risks in the form of increased occupational costs within malls, as well as higher product prices for retailers
This is expected to increase the challenges of landlords many of who have been increasingly open to tenant-friendly leasing options in an attempt to drive occupancy levels, as well as tenants who have had to re-strategise their businesses to stay afloat and continue operating within malls.
As challenging as 2018 was, Edu says it was still better than 2016 and 2017 which were the peak of recession, recalling that as the year progressed, the
“Enquiries hovered around 30 square metres to 60 square metres from both local and
Ayo Ibaru, director, real estate advisory at Northcourt, noted that outside of F&B, very few international brands entered the market in other segments such as beauty, fashion and accessories.
Modern retail is driven these days not only by the wares retailers have in stock, but also by leisure which gained significant traction in 2018 with the consolidation and relative success of brands such as Rufus and Bee, Upbeat and the various cinema houses additions in the market.
But landlords have become increasingly more sensitive to the fact that F&B offerings are not a strong enough influence to increase footfall and dwell time at malls, thus a more diverse tenant mix with child-friendly offerings, for
“Tenants that were successful in adopting cost-effective strategies as well as brand distinction in the market were able to retain occupancy within malls and expand their footprint despite stagnant purchasing power and crawling consumer confidence. Activity in the core market experienced very gradual growth in 2018,” Edu said.
CHUKA UROKO
