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A recent report by commercial property services company, Broll Property Services Limited, on Nigeria’s retail market viewpoint in the first quarter of this year, found that it was becoming increasingly difficult for retail industry stakeholders such as developers, retailers and manufacturers to run their operations in the country due to economic instability.

The report also found that developers were the worst hit as many retailers were finding it difficult to take up space in malls.

The report stated, “Developers may have to push out dates, opt for phase developments, or reduce the size of the development all together to limit risks. 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, who are still moving forward with development plans, are limiting their exposure to the market by reducing the size of their retail projects. Two of their planned projects in Owerri, which opened in February 2016, and Asaba were reduced from 13,000m² to 9,000m².”

Developers are, however, not the only ones affected as many retailers have also started cutting down on space and staff strength or closing shops altogether.

An estate surveyor and Principal Partner, RogbaOrimolade and Co., Mr. RogbaOrimolade, told our correspondent that the instability of the naira exchange rate was affecting not just retailers and developers, but also the financiers and real estate agents, who were fully into the letting of the retail stores.

He noted that there were certain categories of retail outlets, which take up spaces in the malls, and a lot of them deal so much o imported products.

Orimolade added that retailers such as Pep Store, Mr. Price and even Shoprite, to an extent, were all affected and this had in turn affected upcoming malls and the development pipeline.

“If majority of these retailers are the key anchors, obviously the developers can’t do much without them being able to still take up spaces. Most of their materials are imported and they rely heavily on foreign exchange. Of course, a lot of them are suspending taking up spaces; some still take and are still in the game, but their operations are slowed down,” he said.

According to reports, Truworths, a South African fashion retailer, like its counterpart, Woolworths Holdings Limited, which left Nigeria in 2013, had early in the year closed its two remaining stores in Enugu and Delta due to capital controls.

The clothing company reportedly struggled to get stock into and cash out of the country for some time before deciding to call it quits.

While Woolworths attributed its exit to tough market with high rental expenses, Truworths said it could no longer cope with difficult regulations.

The Chief Executive Officer, Truworths, Michael Mark, was quoted as saying that the regulations were making it extraordinarily difficult to get stock into the stores or get money out.

“So, there was no point any longer. Obviously, everyone gets excited about Nigeria because of its size, but I think they’ve taken an incredible strain with internal problems in the country politically; and then, there are the issues with their oil,” Mark was quoted as saying.

The report, however, stated that some retailers, such as Shoprite Africa, increased their sales by 19.7 per cent by exploring local distribution and sourcing options to significantly reduce the import bills.

Malls developer and Chief Executive Officer, Top Services Limited, Mr. Tokunbo Omisore, said the real and retail sectors had been made unattractive.

He noted that prior to the fiscal policies, retail malls’ development operated a dollar denominated rental, though payable on due dates in naira.

This, he said, helped international retailers and investors to operate locally and remain listed abroad, but that the policies came in unexpectedly and shut down this growth thereby, causing a withdrawal of those presently operating and restrictions to newer ones.

Omisore added, “Investors have been denied affordable funds to provide the infrastructural platform for the retail industry to grow. As l have said repeatedly in the past, the real sector must be provided long term funding at a single digit to meet rental demands and provide opportunities that are sustainable.

“Our recent mall development opened in the fourth quarter of 2015 and lost 40 per cent of her prospective anchor tenants, undermining the local bank loan in place. The situation has become one that the local banks do not dialogue with the CBN but simply accept instructions at the detriment of increasing non-performing loans and discouraging entrepreneurs.”

PUNCH.

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Hyprop acquired a 75% interest in Ikeja and Attacq acquired the remaining 25%.

The sellers were private equity group Actis, real estate developer RMB Westport and Nigerian investor group Paragon Holdings.

Ikeja City Mall comprises more than 22,000m² and has a tenant mix anchored by Shoprite. The mall offers South African brands, including Mr Price, Spur, MTN and Markham, as well as international brands, such as Nike, Lacoste, Tommy Hilfiger, TM Lewin, Mango, iStore, KFC and Max Fashion.

Ikeja City Mall is Hyprop’s first investment in Nigeria.

Hyprop CEO Pieter Prinsloo said Hyprop was well placed to capitalise on opportunities across sub-Saharan Africa.

Attacq CEO Morné Wilken said the strategic investment in Ikeja City Mall formed part of Attacq’s larger African investment strategy. It is also Attacq’s first investment in Nigeria.

At 10.22am Hyprop was trading 0.88% lower at R118.78 and Attacq has lost 0.10% to R20.48.

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While making a statement about the resumption of this project in Lagos on Tuesday, Chief Financial Officer (CFO) of Afriland Properties (formerly UBA Properties) added that his company and the Lagos State Government are renegotiating the terms of the concession. This comes after Lagos state Governor, Akinwunmi Ambode cancelled the concession of the Falomo shopping centre in August.

The Lagos state governor cited the terms and conditions of the agreement, stating that they “are grossly detrimental to the interest of the people of the state”. He also added that only N50 million was paid by the concessionaire for a 50-year lease of the property belonging to the state government. However there is also the question of whether this development which ought to have become a state-of-the-art shopping mall along with an office complex and luxury residential apartments is still on the table, and just how long the project will take.

In July 2013, Lagos State Development and Property Corporation (LSDPC), entered into an agreement with Afriland Properties Plc, a member of Heirs Holdings Group,founded by Mr. Tony Elumelu to redevelop the shopping centre, but no completion date was given for the project.

The following year, the consumer market craze in Africa caught up with the Lagos State Government as Governor Babatunde Fashola joined the likes of Shoprite to plan the development of more shopping malls and complexes in the state. He hinted this at a meeting with Global CEO of Unilever, Paul Polman while also expressing his optimism that more shopping centres would spike demand for goods by manufacturing companies, eventually leading to job creation.

“We are supporting the development of more malls and shopping complexes. Apapa has just opened and in about 10 years we have had Ikeja, Lekki, and Adeniran Ogunsanya. We hope that it will represent a major demand pool that will stimulate you to give more supply and in that way employ more people,” he said. But amidst these plans there were also concerns that LSDPC and Afriland Properties were going back on their agreement to redevelop Falomo Shopping Mall.

The old Falomo shopping centre lost most of its tenants due to poor facility management, leaving only Quintessence-an art shop, and the Glendora bookshop. Both shops eventually moved out upon the signing of the concession agreement in 2013.

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The Mountview Shopping Centre is a 10,000-square-metre shopping mall jointly developed by Topwide Ventures and Richards Infrastructures Limited in a commercial and residential district of the Federal Capital Territory, and is being leased out by PropertyBank, managed by Propertyvault Limited, a subsidiary of Richards Infrastructures, and is designed to attract shoppers from Gwarimpa, Jabi, Life Camp, Mabushi and Utako, among others.

According to the partners, SPAR Hypermarket will occupy 3,000 square metres space in the mall.

The lease agreement was signed by Danie Grove of the Retail Development Team of the Artee Group; the Managing Director, Richards Infrastructures Limited, Mr. Andy Morkah; and a director of Topwide Ventures, Mr. Harris Okonkwo, in Lagos.

Discussions are also going on with several other national and international brands for spaces in the mall, which is expected to be completed by the first quarter of 2016.

Morkah noted that the development would alleviate the shopping stress of the residents of the surrounding communities who currently have to go to the central area to shop.

“The mall is midway redesigned and upgraded to accommodate cinema halls and lounges, with better shopping facilities, and this has moved the construction cost to about N3bn,” he said.

The Chairman, Topwide Ventures and chief promoter of the project, Senator Annie Okonkwo, pledged that the developers would display corporate social responsibility by constructing a two- kilometre access road to link the shopping mall to the existing community roads.

Morkah noted that the complex would be properly managed to avoid value erosion and a disorganised setting.

PUNCH.

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The General Manager, Marketing and Sales, Mrs. Titilayo Gbadamosi, said this during a tour of the mall, stressing that investors and customers would have adequate security measures within and around the new project, expected to boost retail services within the real estate sector.

“Festival Mall is a community-based shopping and entertainment node in the heart of Lagos, leveraging a mixed-use development of the Golden Tulip Hotel, offices, long stay apartments called The Residences comprising 198 flats and is the first in the country to have an Independent Power Plant running on gas and the national grid,” she said.

Responding to a recent security scare, Gbadamosi said the firm had in place six different security measures including plain-clothes and uniformed police on 24-hour surveillance, access controllers deployed in entrances and exit points to identify, authorise and vet persons and vehicles going in and going out of the mall.

She said, “There is an incident response team with a complement of two mobile police officers, team leader and driver on daily pin down on 24 hours basis, and their vehicle is equipped with a two-way radio communication system to report any emergency incident and appropriate response to such emergencies as well as police presence.

“There will be external police check/monitoring points and CCTV, which would be strategically located in and around the mall to provide real-time information on security matters.”

According to her, 80 per cent of the lettable space has been taken while the anchor tenant, Shoprite, has commenced operations, adding that Festival Mall is a joint venture among the UPDC, ACA and UPDC REIT, with 46 shops.

She said The Residences, which is expected to house 198 families, was also nearing completion.

Ugochukwu Osuji of the resident architects, CDS Global Limited, said the project, which began in 2014, would be completed in November.

PUNCH.

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The Retail Portfolio Executive, Broll Nigeria, Mr. Johan Blom, said at an investors’ forum in Lagos that leasing of spaces at the mall began last year and had reached 65 per cent with Shoprite as the anchor tenant and Genesis Deluxe Cinemas providing entertainment.

He added that the mall, with a gross lettable space of 11, 000 square metres, would have 43 shops for occupation by renowned brands.

“The mall will be opening fully on November 26, but will be opening in phases from this month; some shops will open in October, some in November and finally, some will be opening in January next year,” he said.

The Chief Operating Officer, Resilient Africa, Mr. Eddie McDonald, said the Owerri Mall, whose construction work commenced 24 months ago, was the firm’s third development in the country, having earlier done the Delta Mall in Warri and another ongoing construction in Asaba, all worth about $150m.

“We are looking at providing a world class shopping experience in Owerri to cater for a population of between 750,000 and one million people,” he said.

McDonald said the choice of second tier cities for the development of malls was based on the non-availability of land in the major cities, especially Lagos, where he said it was becoming increasingly difficult to find space.

He added, “The availability of land is very limited in Lagos; if we can have 50,000 square metres of land in a place in the city, we would love to build a mall; but if you find the land, there may be many landlords and it is extremely difficult for all the landlords to agree; it is a big challenge to build malls in Nigeria and Lagos, especially. Land values in Lagos are way too high for retail development.

“Lagos can have more than 20 malls but the problem is finding viable lands that are affordable. But in the second tier cities, the proximity of the malls to the GRAs is much more than what it could be in Lagos, otherwise we will be building outside the town and no one will go there; we must have population in proximity to a mall.”

McDonald said Resilient Africa intended to move to third and fourth tier cities eventually and was already looking at developments in Abeokuta, Osogbo, Benin, Uyo and Ojo in Lagos, among others.

PUNCH.

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What is your assessment of the growth of retail malls in the country?

First, there is a need to understand what is the proper definition of a mall. It is true many places claim to be providing malls but malls of international standard are usually in excess of 7,500 or 10,000 square metres gross lettable area and all malls of such standard do have a retail supermarket, which will take at least a 2,000 or 3,000 square metres space. But then you will have some taking less than 1,000 square metre built up areas referring to such developments as malls without even knowing who the anchor tenant is.

We have turned all shopping centres and plazas to malls. The growth of malls is still very low. I say that because if we take the measure from a Shoprite occupied mall and possibly, a Spa, which has two or three shops and Shoprite which has to date 13 operational with the 14th intended in Akure Mall, which we are involved with and which will open in October; if you add all those gross lettable areas, we are under half a million square metres of lettable floor areas in comparism to South Africa, which has over 20 million square metres of lettable shopping space.

So, we are far from achieving malls in that order.
Second, when we talk about malls and our malls have to rely 70 per cent on foreign retailers because ours are not empowered or not encouraged to develop, then to us as developers, we are at a big risk. It means that if a condition comes up and the international brands have to stop, then we have a problem. We have to start coming down to the level of small, upcoming local retailers who are also challenged economically.

You said Nigeria is still lagging behind in mall development but some business analysts are worried that these malls will stifle smaller businesses, especially those that are trade-oriented. Do you share this sentiment?

No, I don’t; it depends on what areas we are referring to and what sort of malls we are encouraging. For instance, as a company, we build affordable neighbourhood malls. We use the word affordable because to date, we remain the only developer that has a Shoprite as anchor tenant in a mall far cheaper than any other.

The rent we expect from the mall is quite affordable to encourage the local retailers; we are all challenged by the energy cost; so, the service charges are high. We design and build to a budget; so, we may not have the best gold-plated mall but it is functional and has been built and designed to what we believe the people can afford and not what is expected. Affordability and the ability to buy are two different things.

But, if we have neighbourhod malls in place, these malls will provide opportunities for all these small, corner street traders or retailers to get into and display their business. And of course, if the planning of towns and cities is right, there are places where the street retailers are still maintained all over the world.

There are quite a lot of things that could be done but what is important is for our government to support malls that will encourage and develop local retailers.

You mentioned that 70 per cent of retailers in Nigerian malls are foreigners, what is the implication of this to the economy?

With the exception of a few Nigerian retailers like Ruff n Tumble, HealthPlus, CasaBella, Diva Accessories and Da Viva and a few of them that are trying to grow but are finding it very tough, it is quite a harsh environment.

The local retailers may be reluctant to key into the development because the cheapest malls we have done are denominated in dollar but payable in naira. To date, we have the cheapest mall. The Cocoa Mall in Ibadan sold for $150 per square metre, which at the time was N24,000 using a yardstick of N160 to a dollar before the devaluation. Every other mall is in excess of this amount.

Now, the limit of the local retailers’ commitment is not limited to the rent; there is the service charge with energy taking up to 70 per cent and this works out to almost $120 per square metre per annum. By the time you add $150 to $120, which is the cheapest mall – averagely, malls go for about $500 per square metre – so $500 by $120, you are looking at $600. It means that if you take 100 square metre space, you are going to be paying about N10m per annum, which is not a very big space. So, you need to know that there will be patronage for whatever you are going to sell. This forces local retailers into mushroom space-taking in malls except those that believe they can but then a few find out that after a year or a few months, they cannot sustain rent and the service charge. We should have proper funding of malls, which is why we said that the government should see it as infrastructural development because it creates employment.

In a mall of 10,000GLA, Shoprite on its own plus its direct and indirect staffing, should have well over 400 jobs. So, a 10,000GLA gives employment to a minimum of 1,500 to 2000 people. It means that if we have 100 of such malls, 200,000 people, at least, will be employed. And 100 of such will be nothing for 10,000GLA which is like a small neighbourhood mall.

It also helps the Small and Medium Enterprises to develop themselves, their brands and have a place to display. So, the government needs to look into this area. This is why we ask, what is happening to the pension fund? Every developer all over the world uses pension funds. Now, it is in excess of N4.3tn and it is sitting in a cooler somewhere, where it is not being utilised; it is not helping employment or creating opportunities. When will this be made available to Nigerians to make the positive change that we are all craving for?

A lot of developers are focused on residential buildings due to the high deficit. What is your interest in retail mall development?

Housing provides shelter; mall development provides opportunities for employment. Now, when everybody is employed, people are able to live in decent housing estates and those housing estates are properly maintained and where mortgages are involved, there are no defaults because of unemployment. It’s been proved all over the world that once you live in a housing estate, whether given to you through government subsidy, if those within are not employed or have something to do, they turn such estates into slums.

You can imagine 50 or 60 per cent of the youths of such places or even those that are not youths but losing their jobs and having to live in such estates, it becomes derelict. Crime rate increases out of boredom.

When you look at the developed nations of the world such as the United States of America, what runs its GDP is retail. It runs the GDP of all the developed nations; it is the only way to keep above waters. It gives employment opportunities to many. It develops more brands, more innovations. And when you look at the tradition of the Africa, especially Nigeria, we have always been traders; we have night markets, day markets, weekly, monthly and bigger markets. Marketing, trading and being retailers have been part of our people. The only difference is that the developed nations may say ours is not structured but if we really go down into what they did in the past, it was structured in their own way. This is because they knew which days of the week to trade and what sections to display their wares.

Whatever structure we have, we should improve on that, infuse it with Information Technology and put it forward as an African solution. People have to eat. After the death of Kingsway Stores, the UTC and others, we lost over 20 years not improving structured retail business. But when Shoprite came about 10 years ago, it gave opportunities to those in the food and business sector. There were many people that loved to go into food processing but had nowhere to sell their products. Most felt frustrated and moved away. But when it came, it has helped those in packaging to improve. It has helped those in food processing too because the concept behind Shoprite is not to say no to your product if it is properly packaged. And if consumers buy it off on displaying it, then you are in business.

It’s been a big help and a showroom and something to develop the minds of the youth in seeing that they can be out of school and develop themselves as entrepreneurs and develop businesses that can do well. To miss out of retail will be a big minus to us. Everybody has tried to be in oil and gas but the future of that sector is no longer the same. But we have all seen that food will always be in demand. You need food, shelter, clothes and of course entertainment; these make the total package and this is why as a nation with over 160 million people, we need to be more involved in retail growth rather than paying lip service to it.

What is the impact of the naira fluctuation on property development?

It has had a lot of impact; we don’t even know what it is affecting right now. As a standard for malls internationally, it is denominated in dollars because international brands coming in do so on dollar rating. The CBN regulations and demands put restrictions on what foreign exchange should be, which at the end of the day, will have impact on the economy. But the immediate impact is that it will kill a lot of businesses, opportunities and, if care is not taken, it will increase unemployment.

PUNCH.

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