Nigeria Retail Real Estate Market Outlook: H12021 Market Highlights

In the first half of 2021, the overall outlook of the organized retail real estate in Nigeria recorded a positive growth with the market valuation of $1.669bn, a 59.99% growth as against $1.042bn recorded in H12019.

The positive growth recorded (away from the dark days of FY20) in the sub-property market was largely influenced by gradual recovery of the global and local economies, the return of business and economic activities that was restricted last year due to Covid-19 pandemic, optimism arising from the vaccine-led confidence and the positive growth value in the global oil market as recorded at the end of H12021 relative to the end of 2020.

The key takeaways are:

a. An upward growth of 63.07% in the EGI in H12021, amounting to $253.8m as against $155.7m recorded in H12019; resulting from the continued vaccine rollouts, improvement in the social distancing measures and protocols at the malls and the gains from the online retailing, etc.

b. Despite economic challenges and rising business risks, retail market activities contributed to over 90% of lease renewal probability and almost 100% collections of invoices issued at H12021. This accounted for a 60%+ in the recoveries and other incomes as seen in the H12021 vs H12019 Market Valuations and Local Reports.

c. Currency devaluation, rising food inflation, forex market, business and investment challenges, insecurity, Covid-19 pandemic, supply chain difficulties, vacancy, rent concessions, loss of income due to social unrest, all contributed to the 80% loss in NER.

d. Total operating costs (including leasing and capital costs) as a percentage of the EGI recorded a 0.20% growth in H12021 compared to H12019.

e. A 4% positive growth achieved in the real estate sector for the H12021 (as reported in the 2021 FGN Economic Recovery Plan Performance Review) contributed to the 59.99% growth in market valuation at H12021 over H12019.

f. Inflationary concerns are major, but we expect monetary policies to remain supportive of the economic growth as witnessed in Q2 gdp growth of +5.0% YoY growth as compared to the -6.10% recorded in same period last year.

g. The impairment value (from Credit Loss) of 15% - 25% of EGI, the Covid-19 virus variants and unbalanced fiscal and monetary policies remain a major risk to retail real estate performance and growth.

Source: akinABRAHAM & ASSOCIATES research

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