Retail: Developers cut back on projects size to limit risks

Retail space providers responding to the economic headwinds in Nigeria are cutting back on the size of their projects in order to limit their risks. Analysts see a hazy outlook for the retail sector in the country, saying it depends largely on economic reforms as well as the lifting of foreign exchange restrictions.

Broll Properties in its Q1 2016 report says “developers may have to push out dates, opt for phase developments or reduce the size of the development all together to limit risks”, pointing out that this will create a considerable slowdown in the growth of the formal retail market across Nigeria, especially outside the prime locations in core cities of Lagos, Port Harcourt and Abuja.

Developers such as Resilient Africa which is still moving forward with development plans, is limiting its exposure to the market by reducing the size of its retail projects. Two of its planned projects in Owerri, which opened in February 2016, and Asaba where reduced from 13,000 square metres to 9,000 square metres

Retailers are also taking some bashing such that while large grocers like Shoprite, the South African retail chain, have the ability to grow and source local produce, many of the smaller retailers may struggle to survive.

“Truworths, a fashion retailer, decided early in 2016 to close their two remaining stores in Enugu and Delta due to capital controls. They join other South African retailers such as Woolworths in deciding that the returns did not outweigh the risks and challenges faced in the country”, the report notes.

Broll, however, posits that, Nigeria with a growing middle class and increasing urbanisation, still holds promise for investors and developers who are willing to take a long-term view on the country.