In 2014, Nigeria witnessed an unprecedented increase in the number of shopping malls that berthed in major cities like Lagos, Abuja, Port Harcourt, Aba amongst others.
Major Nigerian cities, especially Lagos and Abuja, saw in 2014 what seems a revolution in the retail segment of the real estate market driven by the country’s encouraging demographics, changing household shopping culture, strong purchasing power and high consumer spend coming from the upper and emerging middle class population.
The rebirth of shopping malls has redefined consumers’ lifestyle in the areas where they are established, the surge in the growth of Nigeria’s retail sector may not have seen the last of investors as Resilient Africa says it has seen a huge potential in the sector notwithstanding that it is still relatively immature.
In 2104, a joint venture by Shoprite and Stanbic IBTC as development partners and Resilient Africa – a real estate investment and development company from South Africa – is out with an intention to develop as many malls as it can within the shortest possible time in Nigeria.
“The potential of this (Nigerian) market is unlimited and it is relatively immature. We see big international (European) retailers coming here in the next two to three years. I think Africa is the flavour of the moment and it is only natural for international investors to migrate to the continent,” Japie Swart, Resilient Africa’s chief operating officer, told BusinessDay in an interview in the outgoing year.
Swart disclosed that they were already tapping into the opportunities which this market offers with the development of Delta Mall, a retail outlet sitting on 14,000 square metres gross lettable area estimated to cost $58 million on completion.
The mall which is located at Effurun roundabout in Delta State, Swart said, is a joint venture project involving his company, Delta State government and an undisclosed local businessman, adding that March 2015 has been set for the opening of the mall already 70-80 percent ready on construction side.
“This mall occupies 14,000 square metres gross lettable area and there are 65 individual shops. About 70 percent of these spaces have been let and we are negotiating letting another 20 percent. So, we anticipate that the mall will be 90 percent let at opening.
“Shoprite as the anchor tenant and project partner occupies 3,400 square metres, Lifemate Furniture occupies 1,100 square metres while Mr. Price occupies 650 square metres,” the COO said.
Delta Mall was one of the many shopping outlets that ca me into the Nigerian retail sector to operate outside the traditional city centres of Lagos, Abuja and Port Harcourt and this development was explained by Matthew Chency, project manager, Resilient Africa at Tenant’s Forum in Lagos.
“Wherever we see opportunity, we pursue it. All of us cannot just focus on the big cities. By doing that, we will be over-supplying the market there, but not tapping the opportunities in the rest of Nigeria,” he said, explaining that their choice of Effurun for the Delta Mall was based on available business opportunities and market research.
The mall had modern facilities such as public toilets, a lift for accessing the first floor; parking space that will take 570 cars and, as an enclosed structure, it will be fully air-conditioned for climate control. The price per square metre of space ranges from $25 to $70 depending on the size and location of the shop space, and this price, according to Swart, is market-related and competitive.
For logistics reasons, Swart said their investment focus, for now, was on the Southern part of Nigeria, disclosing that they have broken ground for the development of another mall in Owerri that would be opened in December 2015.“Our focus, for now, is on the Southern part of Nigeria from logistics point of view.
We usually engage local contractors for our construction and we cannot move them about because we are not a construction firm like Julius Berger. Right now, we are using artisans and professionals from Nigeria to develop our malls”, he said, disclosing that the design of the Delta Mall was done by South African architects in conjunction with Nigerians.
In a related development in 2014, market received another major boost as Berverly & Sam Properties launched its upscale Purplestone Mall, Abuja into the market with not only a new development proposition but also a new shopping experience that will be pocket-friendly.
Though the developer said the choice of Abuja for the development of this mall was because of the ‘cheaper’ cost of acquiring land in Abuja relative to other locations plus the ease of doing business in the city, Abuja also presents investment and economic indices which investors find compelling.
With a rapidly growing population of 2.2 million, Abuja – Nigeria’s federal capital city –became a very strong market comprising A and B level consumers which underpin the residents’ potential buying power. The city is said to have the highest per capita income in Nigeria and according to a recent study on the city’s consumer spend, there are over 68,000 households in the city with annual expenditure of over $150,000 per household.
Lilian Agbakoba, Berverly & Sam Properties’ MD/CEO, explained that Purplestone, in its residential and commercial developments, targets people at the lower level of the society, thus mall would be more affordable than its peers in order to reach this class of people.
The Mall, which opened in November 2014, sits on 300 square metres of land, offering 400 shop spaces and opportunities for banking halls, hair-dressing salon etc, and according to the CEO, these shop spaces go for prices 30 percent lower than those of known brands in town.
With a huge consumer market, growing economy and increasingly urbanised population base, Nigeria represents one of the biggest opportunities for the retail sector in Africa. However lingering concerns over select risk factors, including tariffs imposed on the industry in 2014.
Currently, more than 80m of Nigeria’s 170m citizens live in or close to urban areas, a figure that is set to rise in coming years as the economy moves away from its traditional rural base. This shift to the cities, and the rise of a broader middle class, represents a vast pool of customers for retailers.
According to a report released in July 2014 by research firm McKinsey Global Institute, Nigeria’s consumption could rise to $1.4trn a year by 2030, from its present level of $388bn a year, an average annual increase of 8%.This rise in consumption was driven by higher income levels, with the report forecasting 35m households to be earning more than $7500 a year by 2030, greatly expanding the middle-income bracket.
This increased affluence is expected to result in 7.1% annual growth in sales of food and non-food consumer goods. The rise of non-food goods such as personal care products will record an even sharper rate of growth, with sales rising by 10.6 percent a year through to 2030, compared to 6.8% for food.
Another report prepared by international management consultancy A T Kearney earlier in 2014 tipped Nigeria, along with Gabon, as offering the best retail investment opportunities in Africa. Kearney’s African Retail Development Index ranked Nigeria second overall for retail potential, saying it had rapidly evolving retail dynamics and demographics, with many other global retailers planning to set up shop.
In 2013, French retail giant Carrefour partnered with the French distributor CFAO, which specialises in African sales and distribution, and plans to open stores in eight countries across the continent by 2015, including in Nigeria.
In the same vein, 2015 is expected to mark a technological milestone as the number of households possessing a mobile telephone will surpass 90 percent for the first time (90.3 percent), according to Euromonitor forecasts (based on 86 countries which account for 87.3 percentage of global households). This is important for several reasons:Mobile telephones are growing in ubiquity and are now considered an essential household item, even in less affluent countries and regions.
In Africa, for example, mobile phones have leapfrogged personal computers enabling consumers in remote areas to get connected; this trend is also representative of a growing global middle class; communications is often amongst the first categories where discretionary spending occurs, once consumers enter the realms of spending beyond the essential items of food and housing; as more consumers seek to upgrade their handsets to smartphones or mobile phones enabling web access, marketers should consider mobile and Internet marketing as an area for growth in order to reach new consumer prospects directly.
There remain discrepancies in mobile phone penetration rates across the world with higher income countries tending to have a greater proportion of mobile phone ownership.
However, big emerging markets such as India, Nigeria and Mexico with relatively low mobile phone penetration offer growth potential, while saturated markets in developed economies can be targeted with more sophisticated devices as consumers seek products that can help them stay digitally active while on the move and where one device will satisfy all needs. The boundaries between personal and work technologies will continue to blur as more workers can work from anywhere at any time.
Source : SunOnline