Space, anchor tenants scarcity undermining retail market growth
Scarcity of real estate space or malls of international standard is threatening the revolution which the retail market has seen in the past couple of years in Nigeria, slowing the coming of more international retailers warming up for the country’s soaring buying power.
Notwithstanding the expected coming of Carrefour of France and the aggressive expansion plans of Shoprite, The Games and Walmart, the scarcity of more quality anchor tenants still raises concerns for market growth as investors build malls in expectation of quality and well-capitalised tenants.
Driven by growing population and rising buying power, especially among the middle class, the retail market is undergoing a revolution here, swelling investment appetite and satisfying hunger for modern and convenient shopping experience among consumers.
The country’s population of 160 million is said to be growing at 2.5 percent per annum with an estimated 42 percent urban population while per capita income has increased from $378 to $1,615 within a 12-year period spanning 2000 to 2012.
A study carried out by a private equity investment firm shows that within a four-million population consisting of one million households in Lagos, $1,500 is spent monthly on consumables by each of the households, while in Abuja, each of its over 68,000 households within its 2.2 million population spends over $150,000 annually on consumables.
Analysts say that these statistics are quite compelling and attractive to international retailers who, more than ever before, are perfecting plans to enter the Nigerian market to take a bite of the immense opportunities in the market.
“The challenge here, however, is the scarcity of or insufficient physical structures (real estate space) such as standard malls that will absorb this increasing interest from international retailers,” Chu’di Ejekam, director, real estate in Actis, told BusinessDay.
An analyst, who does not want to be named, agrees, adding that the same problem exists in office space where one can hardly find an international standard office space for foreign investors. “It is amazing how many investors from outside this country that are ready to come to do business here but can’t find quality, well-finished and standard office space,” said the analyst.
Speaking further, Ejekam noted that in Lagos, for instance, a city of 18 million residents, there still remain only two world-class malls – The Palms and Ikeja City Mall. “So, if a retailer wants to come in, where will he establish his shop?” he asked, adding: “There is pressure on big-time investors to invest more in order to create space for the incoming retailers. The pressure is on them also to reduce the existing demand-supply imbalance in the market. Supply is not sufficient to meet the growing demand.”
He explained that a number of factors were responsible for this scarcity, listing land acquisition, regulatory and building approval issues on the part of government, capital in terms of equity and debt, as the main challenges.
“Land is a big challenge; it is still difficult to get one that is well priced and large enough to accommodate the kind of mall that Actis would like to build and also standard enough to attract foreign retailers,” he said.
Capital, according to him, is also a challenge because there are few well-capitalised institutions that can raise the kind of equity needed to fund a shopping mall development, explaining that it requires $80-$150 million which only few banks can provide.
In spite of the challenges, however, some investors have put their hands on the plough, building malls in some parts of the country. Whereas Actis is busy with the Jabi Lake Mall in Abuja and Ado Bayero Mall in Kano, UACN Property Development Company (UPDC) plc is building the Festival Mall in Festac Town estimated to cost N5 billion.
By: Chuka Uroko