Foreigners eye more investment in retail malls’ development

April 4, 2016

Maureen Ihua-Maduenyi

Despite challenges facing the real estate sector and the economy in general, more foreign investments in retail mall developments are expected in Nigeria in the next 12 to 36 months.

Findings by our correspondent indicated that over the next one to two years, 183,500 square metres of retail space would be completed with about 66 per cent of the malls expected to be delivered in core markets such as Lagos and Abuja, with about 79,000m² and 43,000m², respectively.

More retail spaces are expected to be completed within the period in Ogun, Cross River, Niger, Delta, Imo and Anambra states.

According to a report by real estate services company, Broll Property Services Limited, despite the current headwinds facing the retail sector, interest from investors, espe

cially those backed by foreign capital, has remained strong as the inherent growth potential has kept many investors in the sector over the long term.

The report stated that international investors continued to constitute the largest driver of the investor market.

“Given the perceived oversupply in the office market, private equity firms from the USA and South Africa, as well as some indigenous financial houses are beginning to focus more attention on the retail sector, with investment strategies that emphasise smaller-sized retail schemes,” the report stated.

Despite a delay in completion of most of the malls, developers have continued with ongoing projects such as the Owerri and Onitsha malls, both of which have had their completion dates pushed from the last quarter of 2015 to the second quarter of this year.

Other developers have also gone ahead to start new projects, including RMB Westport’s 27,318 m² Asokoro Mall in Abuja and the 30,124 m² Royal Gardens Mall in Lagos.

The report stated, “Despite challenges facing the sector, investors remain bullish as they anticipate increasing opportunities and long-term growth potential in the sector.

“Investors have persevered to ensure that ongoing mall projects come to fruition, whilst some others have gone on to break ground for new developments. Over the next 12 to 24 months, 183,500m² is expected to be delivered to the market.”

South African retail giant, Shoprite, has also announced its intention to develop 15 new outlets in the southern part of Nigeria over the next 36 months.

The President, Mortgage Banking Association of Niger, Dr. Femi Johnson, said Shoprite was expected to become the largest single off-taker of retail space in the country, adding that there had been increased investments from international investors both in office and retail developments in recent times.

On the leasing side, the report stated that the next 12 to 18 months would remain “a tenants’ market” as uncertainty in the economy, fuelled by tight regulations and currency issues, continued to pose challenges to the sector, which would in turn make landlords to increase incentives to attract as well as retain tenants.

“Landlords are likely to go further than allowing tenants longer payment periods for security and fit-out deposits to offering even longer rent free periods. The adoption of this practice is informed by the need to attract retailers from the limited tenant pool to existing and upcoming malls and in the light of the significant increase in supply across the market,” it stated.