Experts link growth in retail sector to anchor tenants

With the dwindling fortunes of the retail sector, property developers are re-strategising by using anchor tenants to woo subscribers to their outlets, thereby increasing patronage of their facilities.

The Guardian investigation shows that shopping malls across Lagos and Abuja are not performing optimally, as traffic has reduced by almost 50 per cent in some cases. The spiral effects could also be felt in the reduction of occupancy levels and financial performances.

Findings also show that an average shopping mall requires footfall that ranges between 2000-5000 daily to survive. Speaking on the development, an estate surveyor and valuer, Mr. Rogba Orimalade said anchor tenants are pivotal to the success of most retail facilities because they take the biggest space, and drive traffic that is translated into naira and kobo.

He said for a developer to spend money to build a shopping centre or mall, the key thing is the Return On Investment (ROI). Orimolade who has been involved in advisory capacity for most ‘Grade A’ mall development including the Ikeja mall, Maryland, Ikoyi Plaza, and the Palm malls said, “Investors need a tenant that could generate, and bring footfall to the facility.”

Orimalade stated that anchor tenants gain a lot by virtue of brand identity through which they drive traffic to the facility. The owners and promoters of the facility as well as anchor tenants he stated develop a symbiotic relationship in such a way that they both help themselves.

But what are the benefits for the anchor tenants, Orimalade explained, “Because they are taking big space, they command biggest discount, tax reliefs and certain windows in terms of free rental periods that are usually given for them to set up properly, and have enough time to generate their enormous investment. The promoters of this facility also give the anchor tenants some level of inputs in helping them reduce their costs.

“For instance, they help them to finish some of their spaces and there are instances where a promoter even provides generators and cold rooms for the anchor tenants to ease initial investments.”

He reiterated that the future is bright for anchor tenancy, stating that irrespective of how e-commerce has taken over the space in Nigeria, brick and mortar retail is not leaving us anytime soon.

Orimalade who is the former Chairman of Lagos State Branch of Nigerian Institution of Estate Surveyors and Valuers said there is a transition from the era of monstrosities of massive malls to localized retails facility.

The Managing Director, CBRE Excellerate, Mr. Jemi Dawodu who has been involved in the development of several malls, explained that developers have a preference for anchor tenants to ensure security of income. He said, typical leases structured with key anchor tenants in the country are at reduced rate compared to other shops, which are leased between five to 20 years.

“The devaluation of the dollar and restriction policies in terms of dollar transactions within the country tend to limit the positive impact leases with anchor tenants are meant to bring to landlords. Once the impact of COVID is relieved along with Nigeria focusing on improving its refineries, the trickle effect will be felt across board, most especially in the retail real estate sector”, he said.

According to a private developer, and Chief Executive Officer, Property Vault Limited, Andy Morkah, the advent of online shopping activities and the CoVID-19 pandemic hasn’t helped general visit to the malls. “Any shopping malls that depends on only the impact of the anchor tenants may not continue to do well.”
 
Morkah said, “Mall developers are now beginning to consider activity / leisure based spaces in their designs. For example, cinemas, game centres, gym, eye clinics and others. These shops will further strengthen the daily footfalls to the shopping mall. Developers who do not consider the impact of online businesses in their designs will continue to have most of their spaces un-leased, and eventually keep unprofitable malls. Activities and leisure based space allocation has become the way to develop and manage the future and profitable malls.”