As Nigeria’s cities continue to grow, neighbourhood malls appear set to play an increasingly central role in urban retail. Their success, however, will depend on balanced planning, improved customer service, adequate infrastructure and policies that support both investors and surrounding communities, VICTOR GBONEGUN reports

With Nigeria’s urban population expanding rapidly due to sustained rural-to-urban migration, the retail landscape in major cities such as Lagos, Ibadan, Abuja, Enugu and Port Harcourt is undergoing a notable transformation.

Increasing congestion, long commuting times and rising transport costs have combined to reshape how residents shop for everyday needs. Against this backdrop, neighbourhood malls, relatively small, convenience-driven retail centres, are springing up across residential districts and suburban corridors, gradually redefining shopping culture in urban Nigeria.

Once concentrated mainly in central business districts and prime commercial hubs, retail malls are now moving closer to where people live. Investors are shifting away from the traditional model that requires shoppers to travel long distances to large, destination malls.

Instead, new shopping centres are being developed within neighbourhoods, offering easier access to groceries, pharmaceuticals, food services and other essentials. This evolution is not only improving convenience for residents but also helping to reduce traffic congestion and lower transportation expenses.

Globally, the neighbourhood mall concept has long been embraced by investors as a viable retail model. In Nigeria, however, the sector was initially dominated by large, Grade ‘A’ malls developed by foreign or multinational players.

Today, local investors are increasingly adopting the neighbourhood mall format, tailoring it to local consumption patterns and income levels. Location has emerged as a defining factor driving the success of these smaller malls. Rather than expecting shoppers to drive miles to an out-of-town retail complex, developers are situating outlets close to residential estates, busy junctions and community centres.

As a result, a new generation of shopping centres is emerging across Nigerian cities under brand names such as Jendol, Justrite, Addide, Goodie and Park ‘n’ Shop. Homegrown brands, including Addax, Essenza, MedPlus, The Place, Ebeano, Hubmart, Grand Square, HealthPlus and Bokku Mart, are also expanding aggressively, establishing multiple neighbourhood outlets to serve everyday consumer needs.

Typically, neighbourhood malls range in size from 7,000 square metres to 13,000 square metres, depending on the location and target market. They are designed to provide essential goods and services rather than luxury shopping experiences. Tenants usually include supermarkets, pharmacies, food outlets, quick-service restaurants, salons, laundries, electronics and white goods retailers, as well as basic fashion stores. The emphasis is on convenience, functionality and affordability.

This approach contrasts sharply with the earlier era of Grade ‘A’ malls, such as Novare Mall, Jabi Lake Mall, Ikeja City Mall, The Palms, and Circle Mall, which were developed as destination centres offering entertainment, cinemas, food courts, and leisure attractions. These malls, often spanning 15,000 square metres or more, served as social hubs where visitors spent extended periods shopping, dining and taking photographs. Prominent developers like Novare, Shoprite, Gateway Mall and Jabi Lake Mall operated within this space, many of them backed by foreign capital.

However, macroeconomic pressures have altered the retail equation. Foreign exchange liquidity constraints, rising operating costs and difficulties repatriating profits have weighed heavily on large mall operators. A recent Knight Frank report titled “The Ultimate Guide to Africa’s Real Estate Markets” noted that Nigeria’s inflation rate climbed to a 15-year high of 33.2 per cent in the 12 months to March 2024, significantly eroding consumer purchasing power. The report observed that rising inflation has curtailed consumer spending and reduced retail footfall across the country.

According to Knight Frank, prominent international retailers such as South Africa’s Mr Price and Shoprite have exited the Nigerian market, citing macroeconomic volatility, naira depreciation and weakened consumer demand. In response, retail developers have increasingly shifted focus towards smaller-scale neighbourhood malls as a strategy to sustain growth, manage risk and maintain steady footfall.

While certain retail asset classes, such as pharmaceuticals, wellness and lifestyle services, gyms, cinemas, food and beverage outlets, remain resilient, they are often insufficient to fill large Grade ‘A’ malls profitably. Consequently, big malls are now viewed as more risk-averse capital investments, particularly in an environment of high inflation and currency volatility. Neighbourhood malls, by contrast, offer lower development and operating costs, quicker occupancy rates and more predictable revenue streams.

Despite their growing popularity, neighbourhood malls are not without challenges. Poor parking provision, traffic congestion, inadequate customer service and inconsistent planning standards have emerged as recurring issues in many urban locations.

Commenting on the trend, an estate surveyor and Senior Partner at West Norwood Realty, Alfred Osagie, said the rise of neighbourhood malls is less about the buildings themselves and more about the needs they serve. According to him, society is moving away from aesthetics towards functionality.

“It is about the mix of tenants and what they offer,” Osagie explained. “In the past, people went to stores like Leventis because they wanted imported goods they could trust. They didn’t want to worry about whether a product was genuine or fake. Today, people still want trusted brands, but they don’t want to travel far. They want to step into the next store and find what they need.”

He noted that brands such as Ebeano, Grand Square and others are meeting everyday needs conveniently. “Instead of going far, people can shop on their way back from church or after work. It becomes family shopping without stress,” he said.

Osagie added that most neighbourhood malls are self-owned or self-leased, allowing owners greater control over operating costs. “They manage their power consumption, opening and closing times, common area costs and security more efficiently,” he said. “Because they are self-managed and flexible in location, they can adjust operating hours and manage expenses, especially power.”

Unlike large malls, where a standardised experience is required, neighbourhood malls prioritise functionality over ambience. “An average person going to Ebeano is not looking for how fancy the place is. They want a functional store. People don’t go there to take pictures,” Osagie said.

According to him, neighbourhood malls primarily serve the medium- and low-income segments, which constitute a significant portion of Nigeria’s urban population. On parking challenges, he noted that while large malls like Novare offer extensive parking, even they struggle during peak periods such as festive seasons. “For neighbourhood malls, it’s about flexibility,” he said, adding that most shoppers spend no more than 30 minutes in such centres.

“The definition of parking has changed,” Osagie explained. “You are not staying to watch a two-and-a-half-hour movie. Neighbourhood malls are here to stay. The key issues now are customer service and the impact of digital platforms.”

He observed that many neighbourhood malls still rely on traditional customer service models and lack trained personnel. Improving service quality, he said, would strengthen customer relationships and support long-term growth. Osagie also pointed to the implications of new tax regulations and the increasing shift towards digital and card-based payments, which could further formalise retail operations but also increase compliance costs.

With Nigeria’s first- and second-tier cities becoming increasingly dense, the Vice Chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Lagos Chapter, Ayodeji Odeleye, said the country needs more neighbourhood malls to support urban living.

“I think we need more of these malls, but I am not saying small shops should disappear,” Odeleye said. “If the government can support small businesses with grants to scale up, that would also help. Neighbourhood malls are well-suited to densely populated areas.”

He noted that proximity is a major advantage. “Many people live in these neighbourhoods and want something easily accessible. Instead of travelling far to a big mall, they can quickly buy what they need at a reasonable price close to home,” he said.

Odeleye observed that many Nigerian investors are adopting business models similar to global convenience retail brands, which focus on neighbourhood locations. “They may have a presence in high-end malls, but their core strength is neighbourhood outlets,” he said, citing brands such as Bokku, Addide, Value Exchange and Super Savers, which are expanding rapidly due to strong returns.

From a planning perspective, however, concerns remain. Rasheed Osinowo, a town planner, warned that the rapid and sometimes indiscriminate emergence of neighbourhood malls reflects underlying planning weaknesses. “Permits may not always be well scrutinised,” he said, adding that uncoordinated development leads to environmental and traffic challenges.

“What we see is that every outlet generates waste, and this contributes to clogged drainage and degraded green spaces,” Osinowo said. “If these shops were coordinated into designated centres within a defined area, they would be easier to manage and could generate more revenue for local and state governments.”

He expressed particular concern about inadequate parking provision, which often disrupts traffic flow. “Most neighbourhood malls don’t have enough parking, and this affects traffic movement in cities,” he said, calling for stricter adherence to urban master plans and designated commercial zones.