March 17, 2015

Increasing Tenant Depth is Key for Growth in Nigeria’s Retail Sector

Dolapo Omidire

The pool of retailers operating within the Nigeria’s rapidly growing retail market is relatively small. Many including Shoprite, have ties with South Africa, a country that has played an integral role in the development of modern retail in the Nigeria. However, 10 years after country’s first modern mall (The Palms, Lekki) was built, a handful of the South African as well as emerging Nigerian retailers are still dominating. This has meant that the retail offering in most modern malls across the country is more or less the same.

A new report by Broll Nigeria asks why, and points out that multiple hindering factors present in Nigeria are applying pressure against the prospective expansion of existing tenants and prohibit the entry of new ones. This hinders what was referred to as Tenant depth,  the depth in the range of retailers available in a given market catering to different activities/segments. For developers these hindering factors included suitable development sites, affordable finance and construction costs and for retailers/tenants – affordable rentals, accommodating regulations as well as social and political stability were key.

Source: Broll Nigeria
Source: Broll Nigeria

While the pool of retailers present in Nigeria is growing, the offering remains small making it difficult for developers to fill malls of 30,000sqm and larger. Currently, the largest mall under construction in Nigeria is Jabi Lake Mall in Abuja. The 25,000sqm mall by Actis, a private equity firm actively involved in Nigeria’s real estate sector, promises luxury retail brands, a waterfront restaurant and other modern features.

In the next 10 years Broll estimates that tenant depth would have increased and in the 5 years that follow, Nigeria’s retail market would have matured enough to adequately service the demand from local consumers.

Source: Broll Nigeria
Source: Broll Nigeria

Access the report in the ei Research Report Center.

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