Nigeria’s large size malls struggle as vacancy rates hit 56%

Nigeria’s new large size malls are struggling to attract tenants as rising inflation eats into the purchasing power of Nigeria’s once buoyant middle class.

With an average vacancy rate estimated at 56 percent, Novare Lekki Mall in Lagos and Jabi Lake Mall in Abuja, which are reputed to be largest malls in West Africa, and also the newest in the country, are top on the list of retail outlets with unoccupied spaces in the property market, a report by Northcourt Real Estate has shown.

A 22,000 square metre retail facility developed by Novare Real Estate Africa at the cost of $83 million or N31.5 billion at the time, Novare Lekki Mall, which was commissioned in the last quarter of 2016, ended 2016 with 63 percent vacancy rate, meaning that 56 out of its 89 shops are unoccupied.

Also, Jabi Lake Mall, a retail centre sitting on about 48,000 square metres of land with about 30,000 square metres of lettable space is, according to the Northcourt report, 49 percent vacant, meaning that 55 out of its 112 shops are empty.

Jabi mall, the largest in the country with an estimated construction cost of US$100 million, is a joint venture project between Actis and Duval Properties. Actis, an international private equity investment firm, is a foremost investor in retail centres in Nigeria and was the prime promoter of Ikeja City Mall and The Palms both of which it has exited.

“Since the resounding success of The Palms, shopping mall development in Nigeria has caught the interest of developers, financiers and investors”, notes Ayo Ibaru, director, Real Estate Advisory at Northcourt, pointing out that this trend has successfully given platform to international retailers seeking access to Nigerian shoppers as well as strong Nigerian brands that need to retail their offerings.

But retail development is beginning to shrink, a development Hakeem Oguniran, managing director, UAC Property Development Company (UPDC), attributes to government policies and hostile business environment, though experts in the property market say the slow down in property development is expected since most large cities have at least three major malls and tier 2 cities also have, at least one or two, coupled with all the economic headwinds.

However, the high vacancy rate seems to be peculiar to the new malls as older ones like The Palms and Ikeja City Mall, which despite their high rents per square metre enjoy 0 and 1 percent vacancy rate respectively

But faced with the economic downturn, mall developers are also reviewing their project size which Michael Chu’di Ejekam, former Director, Real Estate at Actis, says is the way to go in retail centres development.

Maryland Mall in Lagos, where size optimization and availability of a good variety of entertainment have been fingered as its success secret, is always fully packed despite the fact that it was opened in the third quarter of 2016.

Maryland Mall has just 2 percent vacancy rate. Though location may also have favoured Maryland Mall as similar mid size malls like Circle Mall has 33 percent vacancy rate, Lagoon Mall has 30 percent and Silverbird Galleria 25 percent vacancy rates.

Apapa Mall is one of the mid size malls with a high vacancy rate. ‘‘We have decided to move out of this mall because we are not making enough sales to pay the bills. Throughout the festive season, we did not record a single sale,’’ a retailer at Apapa Mall, in Lagos, told BusinessDay.

The retailer, who was close to tears because he was asked to look for another job, said they are moving their wares quietly to their other outlets, disclosing that their rent in Apapa Mall is four times the rent in their new shop at Adeniran Ogunsanya shopping mall, in Surulere, also in Lagos.

Also Busen, a Chinese clothing company that deals in men’s clothing at the Apapa Mall, moved out of the mall recently. Mr Price, Ruff ‘n’ Tumble, Lifemate and Samsung had closed their outlets at the mall earlier.

‘‘The last time we sold an item was before Christmas. We were more than eight staff but two have been sacked and we are six left,’’ said a staff of PEP, a South African clothing store, who craved anonymity said.

A manager in a top fashion store at the mall said they lived in fear of being sacked even after their salaries had been slashed by 50 percent.

‘‘We made N30,000 yesterday and since morning, we have only made N10,000 and it is almost 4pm now. One of our top managers visited this branch earlier; his body language told us they might decide to sack some more staff since we are not meeting our target,’’ said the manager who does not want to be named.

But the lower sales are affecting retailers in even the bigger malls with low vacancy rates.

Ikeja City Mall, which is not suffering from any shop attrition, is also struggling with low sales. Except for Shoprite, many of the attendants were busy chatting, while others sat looking into space, probably praying for a buyer to stop by, when BusinessDay visited the Mall.

Although some stores had visitors looking in, most of them were window-shopping. ‘‘We are just managing because our business is shaky right now. We have reduced our staff and might be moving out anytime,’’ said a manager in an American clothing store.

The Palms Shopping Mall in Victoria Island was quite busy when BusinessDay visited but retailers say retail traffic was not looking good. ‘‘Sales have not been impressive but those that appreciate quality come to buy,’’ an attendant at Lacoste, a French clothing store at the mall said.

Adenike Ogunlesi, founder and CRO of Ruff ‘n’ Tumble told Business Day in an earlier report that business generally was going south, due to the lingering dollar scarcity. “We have closed some of our outlets. We are facing a market with diminishing buying power and malls that are dollar-denominated in a country where we sell in naira’’, she lamented.

Truworths International Limited and Markham, both South African clothing companies, have shut down their stores completely in Nigeria.

Michael Mark, the CEO of Truworths, had noted that stores in countries bordering South Africa were doing well and in Ghana, the stores were also doing fine. “It is just Nigeria that is not, and we would go back there if everything changes,” Mark said.

 

CHUKA UROKO & CHINWE AGBEZE