The impact of the country’s first economic recession has left some of Nigeria’s biggest malls sitting half empty. Rising unemployment and inflation rates have shown in a significant decline in footfalls in the big malls, leading to high vacancy rates, a half year report on the performance of the real estate market has shown.
Big malls in the three major cities of the country, including; Lagos, Abuja and Port Harcourt, were the hardest hit by the economic recession. Novare Lekki Mall, a 22,000 square metre retail facility has a 57 percent vacancy rate as at June 2017, slightly reduced from the 63 percent figure recorded in December 2016.
This is followed closely by Jabbi Lake Mall in Abuja, whose vacancy rate by the first half of this year was estimated at 56 percent. The mall, a 30,000 square metres shopping outlet, sitting on about 48,000 square metres of land, is a joint venture project between Actis Nigeria (a private equity firm) and Duval Properties.
Analysts attribute the rising vacancy rate in this mall and others in the Federal Capital Territory (FCT) including; Ceddi Plaza with 27 percent vacancy rate, Grand Towers, 22 percent; and Silverbird Entertainment Centre, 32 percent, to the lower purchasing power in the economy and the high political risk of the FCT.
“The increase in vacancy rates for Abuja within this period was more pronounced, suggesting that the shock from the implementation of the government’s whistle-blowing policy and the fierce anti-corruption crusade, may have had unexpected consequences”, noted Tayo Odunsi, CEO, Northcourt Real Estate.
Vacancy rates in Port Harcourt malls averaged almost 10 percent, as the three malls in the city, namely Big Treat, Genesis Centre and Port Harcourt Mall, recorded 14 percent, 6 percent and 8 percent vacancy rates respectively. Odunsi further observed that these vacancies were a reflection of the consumer’s reduced financial position and the waning influence of oil, which is a major wealth driver in Port Harcourt.
In Lagos, however, while Apapa Mall, Circle Mall and Silverbird Mall have also taken hits, with vacancy rates at 35 percent, 27 percent and 31 percent respectively, The Palms has continued its no vacancy rate, with a client-friendly pricing. It has also welcomed global clothiers, Tommy Hilfiger, which has given shoppers more variety.
The retail market in Nigeria has witnessed a revolution driven by the economic boom which raised the purchasing power of the average Nigerian, along with a change in the shopping culture of the emerging middle class who express aspirational lifestyles in their taste for fashion and quality goods.
The economic recession has however changed the narrative in such a way that, according to Femi Akintunde, “people now go to malls for window-shopping and sight-seeing; you now see people eating pop-corn with soft drinks, walking about the mall without buying anything extra”.
Unemployment, which has reduced consumer purchasing power drastically, is a major factor that has changed the retail market story. “While employed consumers were still under pressure from shrinking purchasing power of their salaries, recent figures from the NBS showed that unemployment had risen to 14.2 percent, making it the eighth straight quarterly rise from second quarter 2015 when it stood at 6.4 percent.
Data seen by BusinessDay shows that financial transaction volumes fell in July, with Point of sale transactions dropping by 3.60 percent, while transactions by cheque fell 9.97 percent and transfers by NEFT fell 3.96 percent for the month.
Household Final Consumption Expenditure, which consists of expenditure, including imputed expenditure, incurred by resident households on individual consumption goods and services has been falling since 2015.
Nigeria’s economy has recorded four straight quarters of negative growth to the end of March 2017 for which data is available.
Average incomes in the country fell by about 18 percent in 2015 to $2,550 per annum, from over $3,000 in 2014, according to World Bank estimates.
“In the third quarter of 2016, real year on year growth in household consumption deteriorated, from a (revised) decline of -0.7%, to a decline of -2.0%. This reflects the continuing difficulties that consumers have faced in recent quarters, with rising unemployment, and high inflation eroding purchasing power,” the National Bureau of Statistics (NBS) said in its latest GDP by expenditure report for Q3, 2016, released in June.
Not surprisingly, according to the half year report by Northcourt Real Estate, the country’s leading retailer – Shoprite—has reduced its projected new store openings from 13 to 2, citing economic instability.
Reduced footfalls as a result of the economy have translated to reduced demand for large-sized retail outlets and landlords have had to reduce rents to avoid increasing the vacancy rate. Some tenants have successfully negotiated an unprecedented reduction in annual rentals and payable in local currency.
However, Odunsi hopes that, “should the economy ease up and basic food and retail prices drop, the retailers are expected to see reduced vacancies, but more importantly, sustained footfalls”, noting that some savvy landlords hedged their rent risk by going into long lease arrangements with their tenants.
Source: Business Day