The new year (2019) may be a defining moment for retail business in Nigeria as feelers from investment plans being rolled out for the year show possible momentum for the challenged sector.
Since 2015, the retail sector in Nigeria has been under-performing, leading to high vacancy factor that has placed investors in that space on neutral gear. The challenge has been such that it has tended to erode all the gains and successes the sector has achieved over the years.
But a new report by Northcourt Real Estate on the outlook for real estate in 2019, points to something quite encouraging. “Nigeria has 10 cities among the top 50 urban consumer markets in Africa and 52 million consumers who can afford products within the above average to premium range. 9 million of these consumers are in Lagos and it appears that International and local players know this”, the report notes.
In that direction, $22 billion Universal Music Group announced that it would open a new office in Lagos as part of its West Africa expansion and American fast foods business – $12 billion Burger King outlined plans to open up shop in Sub-Saharan Africa with Nigeria as a focus market.
As part of its campaign to reach 100 stores before the end of 2019 and 774 stores by 2022, Konga outlined plans to invest ₦2.9Bn into its logistics arm, Kxpress, to achieve same day delivery rates higher than 80 percent by mid 2019.
In the same vein, Japanese retail brand, Miniso, rolled out a franchise strategy to have 200 stores operational in Nigeria by 2019 and a 45 percent local content by 2020. Leading Asian retailers have increasingly approached mid-sized mall landlords for space as a means of testing the Nigerian market.
Backed by the $350M Novare Property Fund II, the 7,178 square metre Novare Central opened to the public in Q3 with ongoing conversations around launching its next offering in the nation’s leading oil city, Port Harcourt.
Local mid-sized retailer, Ebeano opened a new outlet in Ikeja and continued plans with its Sangotedo, Lagos development. Filmhouse Cinemas has all but moved in to Circle mall and is poised to increase footfall. Bildiamo’s mall development project, also in Sangotedo is carrying out finishing works and projects a full opening by Q1 2019.
Owners of the 30,000 square metre land acquired for the potential development of a Spar outlet in the Ajah area are yet to move to site, possibly hedging until after elections. Still, experts are optimistic of improved activity by Q2 of 2019. Jubilee mall in Lekki Phase 1 also joins the rooster of retail stores in the Lekki Phase 1 area as Spar opened another outlet in Ikeja.
In the outgone year, there were also a series of expansions by global chains. Krispy Kreme reopened its outlet shut by the Consumer Protection Council after the regulators found it compliant with relevant health and safety standards and opened stores in The Palms Lekki, Novare Sangotedo and Maryland Ikeja malls.
Persianas Group, developer of The Palms, is also in the concluding stages of opening a mall near the Lagos airport area in Ikeja. Domino’s Pizza opened a store on Awolowo Road, Ikoyi sticking to its model of opening on major highways in Nigeria.
However, according to Ayo Ibaru, Northcourt’s chief operating officer, Grade-A mall operators have continued the existential battle to keep vacancy rates low by deploying a raft of strategies which include space redesign, delayed rental payment options and part funding of fit out expenses for retailers.
“Nigeria’s consumer class has grown by nearly 140 percent over the last decade. Ikeja city Mall and the Palms Lekki recorded vacancy rates of 0 and 1 percent respectively. Novare Central, Abuja, the Atlantic mall, Lagos and Big Treat, Port Harcourt recorded 70 percent, 34 percent and 8 percent respectively”, he noted.
New entrant into the retail sector, NEXT Mall, Port Harcourt, was 31 percent vacant. In Q4 2018, Hubmart opened its 4th store with forecasts to add four more stores in 2019. Grade-A malls have dedicated more space to entertainment features, including expanding cinema halls to accommodate the growing demand.
Online retail continues to rise, highlighting the need for efficient logistics and effective warehouse space. Jumia, Nigeria’s leading e-commerce platform, is still in talks to list on the New York Stock Exchange at a valuation of $1 billion. Expectations are that IPO will go live with a sale of $250 million in shares by the Q1 of 2019.
Going into the future, Ibaru noted that proximity to densely populated areas, accessibility, parking and entertainment facilities remain key factors to the growth and success of the retail market. The grounds gained by family entertainment options are expected to deepen with more retailers now aware of its role in sustaining footfall.
“Having tested the mid-range mall concept albeit vicariously through the likes of retailers as Blenco and Ebe Ano in Lagos, investors are warming up to developing mid-sized malls, adding strong entertainment features for good measure”, he said.
According to him, the growth of Nigeria’s film industry, Nollywood, will further increase the number of movies available and translate some benefits of the growing hunger for local big budget productions to the financial statements of mall operators.
CHUKA UROKO
