Despite challenges, more foreign investors eye Nigerian market-Report
London, Feb. 25, 2019 (AltAfrica)-Despite the challenging operating environment, interest from foreign brands in the country’s retail market remains strong, a report by real estate services firm, Broll Nigeria says.
In its analysis of the retail sub-sector in the last quarter of 2018, the firm said international brands’ interest in the country had not waned, even with the low purchasing power of consumers.
“These brands were mostly interested in franchise agreements with experienced local operators,” the report stated.
According to the report, 2018 was a challenging year for the retail market, although less so relative to 2016 and 2017 at the heart of the economic recession.
It stated that many landlords in the market had been increasingly open to tenant-friendly leasing options in an attempt to drive occupancy levels, while tenants have had to re-strategise their businesses to stay afloat and continue operating within malls.
The retail market was one of the worse hit during the recession, with high vacancy rate in many malls across the country, prompting many landlords going creative to keep tenants.
Broll said in its 2018 fourth quarter report that as the year progressed the frequency of enquiries for formal retail space increased, notably in the fashion and accessories as well as food and beverage categories, with enquiries hovering around 30 to 60 square metres from both local and international retailers.
Food and beverage also recorded the highest level of concluded transactions in 2018, the report said.
The report said, “2018 saw the introduction of a number of international brands such as Pinkberry, Krispy Kreme and Pizza Hut. Outside of food and beverage, in other segments such as beauty, fashion and accessories, very few international brands entered the market.
“Leisure retail gained significant traction in 2018 with the consolidation and relative success of brands such as Rufus and Bee, Upbeat and the various Film house cinema additions in the market. Landlords have become more sensitive to the fact that food and beverage offerings are not a strong enough influence to increase footfall and dwell time at malls thus a more diverse tenant mix with child-friendly offerings for example have been perused.”
Broll said in 2018 local retailers found it necessary to implement creative measures for running their businesses not just in malls but within other retail offerings such as neighbourhood plazas or highstreet retail.
“This ranged from aggressive marketing to consolidate brand loyalty as well as exploring cost effective means of operations, for example locally-sourced goods as opposed to 100 per cent importation of goods. Tenants that were successful in adopting cost effective strategies as well as brand distinction in the market were able to retain occupancy within malls and expand their footprint despite stagnant purchasing power and crawling consumer confidence,” it added.
The report said the year started off bleak following the negative effects of the recession in previous years, but that some malls began to record an uptick in foot traffic although basket size had yet to bounce back.
It added that the core market also remained the first destination for international brands entering the Nigerian retail market and performed relatively better than secondary market locations.
“Halfway through the year, asking rentals began to stabilise within certain malls. Some landlords that initially offered discounted rents to drive up occupancy levels began to revise those rates upwards,” it stated.
In the secondary market, which according to the report is primarily a locally-driven market with only a handful of international retailers present, the retail landscape had been challenging, coupled with an even more contracted purchasing power relative to consumers in the core market.
“In order to keep existing tenants and attract new ones, landlords have had to offer concessions and discounted rental rates,” it stated.
According to the report, key factors that will have potential impact on the retail market this year will include secondary market strategies, oil prices and the strength of naira.
The report said, “An increase in creative strategies to drive occupancy levels in secondary locations is anticipated. One of which is targeted marketing as well as mothballing in some locations to keep operational costs down and increase foot traffic in active sections of the malls. (Punch)