What Sho­prite exit means for Nige­ria’s re­tail mar­ket, prop­erty de­vel­op­ers

Business Day (Nigeria) - - NEWS - CHUKA UROKO & BUNMI BAI­LEY

The planned exit of Sho­prite, ar­guably Africa’s big­gest gro­cery re­tailer, from Nige­ria has neg­a­tive im­pli­ca­tions for the coun­try’s al­ready strug­gling $105 bil­lion re­tail in­dus­try and also space sup­pli­ers, ex­perts have said.

The South African re­tail chain has planned to leave Nige­ria, cit­ing Covid-19 pan­demic and the group’s reeval­u­a­tion of its op­er­at­ing model in Nige­ria — Africa’s thriv­ing mar­ket and the con­ti­nent’s largest econ­omy.

The com­ing of Sho­prite is al­most syn­ony­mous with the growth of re­tail mar­ket in Nige­ria which, at a time, wit­nessed what could eas­ily be de­scribed as a rev­o­lu­tion with some for­eign in­vestors, at the time, plan­ning to in­vest $500 mil­lion to fi­nance the de­vel­op­ment of six re­tail malls in five ma­jor cities.

Sho­prite is not only strate­gic an an­chor ten­ant in most of the trail out­lets in Nige­ria, but also a trade booster to other re­tail­ers in a given mall. This is why Cheng Fuller, a re­tail ex­pert, rea­sons that apart from the large num­ber of jobs that will be lost, other stores within the same prox­im­ity of the store (Sho­prite) could suf­fer fur­ther.

“When Sho­prite came in, they pro­vided a source of tourism or re­lax­ation called shop­pers’ tourism. 60 per­cent of peo­ple who went to Sho­prite did not just go for their price, but for the tourism and from there, they will be tempted to do im­pulse buy­ing. And now in this pan­demic, their ma­jor busi­ness model which is large crowds has back up against them,” Fuller said.

He ex­plained that other stores close to Sho­prite would suf­fer more be­cause Sho­prite is the an­chor ten­ant for the stores; now that they are leav­ing, those stores will die a nat­u­ral death. He added that there is also the prob­lem of un­em­ploy­ment as Sho­prite em­ploys about 10,000-13,000 peo­ple across the coun­try.

The exit of Sho­prite would mean that de­vel­op­ers or space sup­pli­ers would suf­fer in many ways. Apart from in­creased va­cancy rate in the re­tail mar­ket which av­er­aged 30 per­cent across cities by the last quar­ter of 2019, in­vest­ment in mall de­vel­op­ment which is al­ready low, will drop fur­ther.

In­ter­est­ingly, many of the re­tail mall or space sup­pli­ers are South African de­vel­op­ers and in­vestors. Most prom­i­nent among these in­vestors is RMB West­port, a joint ven­ture be­tween Rand Mer­chant Bank (RMB) and

West­port Prop­erty Group— a highly skilled real estate in­vest­ment man­age­ment com­pany which was re­ported to be fund­ing about 51 per­cent of Os­apa Mall and 50.5 per­cent of 30,124 square me­tre Royal Gar­dens Mall.

An­other in­vestor is Re­silient Africa, a South African part­ner­ship be­tween Re­silient Prop­er­ties, Sho­prite and Stan­dard Bank, which de­vel­oped four of its choice malls in Delta, Benin city, Ow­erri and As­aba.

While these in­vestors would have a lot of empty spa­ces to con­tend with, let­ting agents and fa­cil­i­ties man­agers would also have a bite of the bit­ter pie. Broll Prop­erty Ser­vices, also a South African firm, which has been pro­vid­ing both let­ting and fa­cil­i­ties man­age­ment ser­vices to these malls, will suf­fer some shock in its bot­tom­line.

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