There has been a considerable drop in the activity of the Nigerian formal retail leasing market in the second half of 2022, according to a recent retail report released by Broll Property Group, an African commercial property services company. New leases signed in both core and secondary retail sectors plummeted by 53 percent from 7,611 in the first half of the year to 3,544 in the second half of the year, as per Broll’s report.
Notwithstanding the stability of the underlying market conditions, the retail industry felt the effects of the widespread spike in energy costs since many businesses are experiencing financial problems or uncertainty as a corollary of this. Resultantly, there has been a drop in the demand for new leases, given that businesses seek cost-cutting measures. Another contributing factor is the growing popularity of internet shopping among Nigerian consumers, which may be prompting some businesses to prioritize online sales rather than retail sales space.
Deregulation of fuel prices in Nigeria led to a surge in diesel prices.
It was predicted in the report that a decline in new lease activity may have been partly triggered by the overall economic slump or a dearth of investors’ confidence. But nonetheless, despite a strong waiting list in the retail sector, rental prices in the secondary market remained stable. Even while retail as a whole is in decline, there are still some sectors where demand is holding steady. Food and beverage, mobile phones and accessories, health and fashion, and home furnishings have all remained among the leading firms driving demand for retail space.
The steady demand rate of these sectors indicates that they are tenacious and continue to exhibit strong prospects amidst the market slump. Dramatic increase in energy costs in the previous year is said to be the aftermath of the Russia and Ukraine war. Still yet, the deregulation of fuel prices in Nigeria led to a surge in diesel prices by 183.7 percent, from N288 per liter in January 2022 to N817 per liter in December 2022, as reported by the National Bureau of Statistics. This unexpected spike in diesel prices, which drives most of Nigeria’s industrial and commercial activity, sent shockwaves across the country’s economy, affecting businesses of all sizes.
Rental rates in both primary and secondary areas had remained stable.
According to the report, the rise in energy costs was also one of the factors contributing causes to the country’s inflation rate, which is at its highest level in 17 years. The Broll research also showed that rental rates in both primary and secondary areas had remained stable. Conversely, in the primary locations of Lagos and Abuja, achieved rent increased by 35.5 percent in H2 to $56/m2/annum from $35/m2/annum in H1.
In addition to the rise in energy costs and uncertainty economic activity, the increase in rent may have contributed to an increase in the number of dropouts from the core market. The report found that the secondary market had not altered and that, with a few exceptions in the central area, all transactions had been settled in local money (naira). Broll analysts said that a decrease in the national vacancy rate of one percent in the conventional retail market may be seen as an indication of growing demand in the sector.
Many reasons contributed to the decline in trading activity.
The analyst, however, reported a decline in trade rates from 91 percent in the first half of the year to 84 percent in the second. Many reasons contributed to the decline in trading activity, including market volatility, changes in customer preferences, service interruptions, and increasing competition. If market volatility persists, the report predicts that both new leases and departures will increase until the market stabilizes. More importantly, given the election results, if the present economic situation persists, landlords may ultimately wind up yielding more and offering more incentives to keep their existing renters.
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Retail leasing activities drop by 53 percent. – The retail industry felt the effects of the widespread spike in energy costs. – Express your point of view.
The significant drop in retail leasing activities highlights the need for the industry to adapt to the new normal brought about by the pandemic, especially by leveraging digital technology to enhance customer experience and engagement. It is also essential for the industry to continue to explore innovative leasing models and partnerships to increase demand for retail space.
Retail leasing activities has gone down as a result of the increase in fuel price. People will only lease at their capability, does making the business go down.
The rental leasing activities is meant to drop seeing how the online market space is more prevalent among the Nigerians in recent times. People don’t really want to set up a physical shop again due to running cost and prefer online where they can reach more audiences.
The Energy sector has being a major driving force of Nigeria economy. Therefore, the spike in the cost of energy will always lead to inflation affecting most retail industry accross the country.
Online business as make shopping easily and faster which is comfortable to do shopping so retail leasing activities will reduce and the economy inflation will also affect it
So many things have hindered the growth of many retail businesses and I can attest to that because I run a small retail business too and things are not moving well currently and I hope things change soon because it has affected a lot of things.
Crazy that the increasing number of Nigerians who prefer to buy online, which has led some retailers to put less emphasis on brick-and-mortar locations, has had a significant impact on the country’s business community.
I feel it is necessary for the sector to keep investigating new lease methods and cooperation opportunities in order to boost needs of its customers for commercial shops, in order for it to expand and for people to amass more money
Retail leasing activities drop by 53 percent. So many challenges in Nigeria that is affecting the retail activities. Government administration need to create enabling environment and make things easier for the people
The high cost of energy is creating inflation in Nigeria since it is the driving force of every economy. As a result of this, it has affected retail leasing and push many to online marketing of their product much is more cost effective.
All what is need by the right authority should be done because the rate at which our economy is going will only favour the rich more and this is very dangerous to the economy progression of any country.