Nigeria's Retail Real Estate Market: Seeing Beyond Market Hurdles – Series 2
Updated: Nov 11, 2023
Nigeria's Retail Real Estate Market: Seeing Beyond Market Hurdles – Series 2
It is amazing, encouraging, and reassuring to see the gross initial yield of formalized retail increased from less than 10% in the pre-2010 era, through the boost and boom, recession, Covid-19, recovery, and post-Covid era, to a median and highest value of 14.34% and 25.56% over a sixteen (16) year period, despite the challenging outlook - foreign exchange imbalance, supply chain issues, rising operating costs, inflation, vacancy and purchasing power concerns, high cost of US dollar-priced imported stock and infrastructure challenges, etc.
At first glance, Nigeria's formalized retail market (core and secondary) appears uninteresting, but a closer examination of operational performance, market fundamentals, and prospects provides a better understanding of what drives the interests of most investors in a market that appears frightening.
Given the highlights of investment achievements and important possibilities in retail, entertainment, and leisure sectors, it is easy to see why investors continue to expand their footprints across formal retail market in quest of market growth and substantial profits, despite adverse outlooks.
Despite the current headwinds, formalized retail performance and growth expectations have continued to support investors' optimism and commitment, particularly those backed by foreign capital and State Government PPP interventions, to continue looking for ways to capitalize on a growing and underserved market and the sector's inherent growth potential in the long term.
More information on how the GIY has evolved in tandem with the changing economy and investment climate emphasizes the importance of scenario analysis of what can happen to investors' assets during periods of uncertainty, volatility, climate change crisis, and other local or international patterns that are becoming more intense as the sector matures.
A key lesson to be learned from the formalized retail's acquisition, sales, and divestment activities in Nigeria is that investors generally look for a variety of forward-looking and structured analytics to help them understand risk, expected returns, and maintain a truly resilient portfolio while navigating these risks in the short term to produce stable long-term returns.
Would you be willing to put up $100 million in exchange for an 11% - 25%+ Gross Initial Yield?
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