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CHAPTER ONE
1.0 GENERAL INTRODUCTION
1.1 INTRODUCTION
Commercial properties are properties generally occupied for
the purpose of carrying on a trade or profession in the
expectation of realizing profit. They comprise mainly of shops,
offices, showroom among others and they command the
highest rent out of the other types of properties uses.
Rent provides the basis of value for landed property and the
trends in Land values are of significance in the prediction and
determination of income from real property.
Also, the income realisable from real estate is required in
evaluating the viability of projects. A number of factors
combine together in determining changes which property
values undergo which are of great concern to the Estate
surveyor and valuer. Amongst these factors are;
(1) Locational influence
(2) Land use pattern
(3) Income
1
(4) Physical characteristics
(5) Demand populace
(6) Supply of the property market e. t.c.
Lagos metropolis which comprises of areas such as Lagos
island, Lagos mainland, Ikeja, Ibeju- Lekki, Eti-Osa, Apapa,
Festac, Suruelre, Amuwo-Odofin, Ajeromi-Ifelodun, Kosofe,
Victoria Island, Oshodi-Isolo are within the central business
district of the Lagos Metropolis. It is mainly a commercial area
characterized by the presence of sky scrapers and expensive
office blocks.
Lagos metropolis, which typifies various areas with high
demand for commercial properties, is used as a case study to
analyse the trend in commercial property value from year 2000
to 2009.
1.2 STATEMENT OF PROBLEM
Commercial property represents the second largest landuse in
Lagos Metropolis after residential because it is an avenue for
profit maximization by both, the owner and occupier.
2
This dissertation will look into the commercial property market
and analyse the factors affecting it and the trend of this type of
properties in Lagos Metropolis.
1.3 AIM AND OBJECTIVES
The aim of this study is to analyse the trend in commercial
property value in Lagos metropolis. In order to achieve this
aim, the following objectives are set forth;
(i) To classify commercial property types in lagos
metropolis.
(ii) To analyse commercial property values in relation to
the pattern of land use.
(iii) To determine the trend by value within the last ten
(10) years.
(iv) To make recommendation on the improvement of
commercial property market in Lagos metropolis.
1.4 SCOPE OF STUDY
The scope of this dissertation is confined to examining the
trend of commercial property value in Lagos metropolis.
Commercial properties are the main land use type in Lagos
3
metropolis and is the nerve centre or hub of business activities
in the whole Lagos metropolis. The time-period covered by this
study is 2000-2009.
Due to the fact that Lagos can not be covered at the stretch,
Ikeja and Lagos Island have been selected to represent Lagos
Metropolis.
1.5 METHODOLOGY OF STUDY
The information required for this dissertation will be gathered
through two (2) sources of data namely, primary and
secondary sources of data.
Primary data includes conduction of oral interview with estate
surveyors and valuer, companies and field surveys by
practicing firms. Meanwhile secondary data includes
information from relevant journals, books and other
unpublished materials.
1.6 SIGNIFICANCE OF THE STUDY
A lot has been written on management of commercial
properties without a need for how these types of properties are
fair in the market over a period of time.
4
Commercial properties especially in Lagos metropolis have
been characterized with high-class design prestige.
This dissertation will proffer factors affecting commercial
properties values and trend of these values in the past and
recent time.
1.7 DEFINITION OF TERMS
In order to erase my element of ambiguity relating to the topic
of this study, it is ideal to throw some light on some basics
term used in the wording of this study. This is necessary for the
sake of clarity.
1. TREND:
These are series of related change brought about by a chain of
causes and effects. Trends are forecast through economic base
analysis, statistical analysis, market analysis and analysis of
economic indicator and surveys . (The dictionary of Real Estate
Appraisal, 4th edition).
A trend can be upward or downward, lateral or horizontal and
in cross series of related changes, which may be identified and
projected into a probable future.
5
2. PROPERTY
According to this study, it is the exclusive right to posses,
enjoy and dispose off land or building. It is the exclusive right
to control economic good.
3. REAL PROPERTY
Michael Thorncroft defined real property as land, buildings, and
other improvement on land, together with, the legal right
relating to these assets. Real property can be classified into
residential, commercial, industrial, agricultural and special
purpose property.
(4) COMMERCIAL PROPERTY
The types of property dealt with in this category can be
grouped as follows;
(i) Shops
(ii) Office space
(iii) Stalls
6
One features common to all the aforementioned classes of
property is that, generally speaking they are occupied for the
purpose of carrying on a trade or profession in the expectation
of profit making. It is the profit, which can reasonably be
expected to be made in the premises or occupied space,
which, in the long run will determined the rent a tenant can
afford to pay to them (owner/Landlord).
(5) VALUES
Values literally means the worth of something in terms of
money or other goods for which it can be exchanged. There are
various concepts of values such as rental value, capital value,
rateable, value et.c. Whenever a valuer used the word
“value”, which is defined by the Royal institute of chartered
surveyors as “ best price or best rent which might reasonable
be expected to be obtained for the interest in the property at
the date of valuation assuming;
a. A willing seller or lessor;
b. A reasonable period in which to negotiate the sale or
letting, taking into account the nature of the property
and the stage of the market;
7
c. That values will remain static during such period;
d. That the property will be freely exposed to the open
market, and
e. That no account will be taken of any higher price or
rent that might be paid by a purchaser or lessee with a
specific interest.
6. RENT
This is the periodic payment for the use of land or buildings. It
is an amount expressed in monetary terms at which a property
might be reasonably expected to let out usually from year to
year.
7. PROPERTY MARKET
This is a type of an investment in which capital sum is given up
in expectation of a return to be received over a period of time
which could be periodic in form, or it could be allowed to
accumulate and taken as a capital sum.
1.8 LIMITATION
8
In the course of this research work, various limitations were
encountered posing threat to the completion of this research
they include:
- Shortage of time
- Inadequate finance
- Paucity of relevant materials
- In availability of necessary data
- Weather constraint
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 INTRODUCTION
It is a known fact that no project is written in isolation, it is
important to refer to works or researches carried out by re-
9
know authors in this area of study in this chapter. Furthermore,
attempts will be made to explain conceptual terms such as
property and its various types, factors influencing the value of
properties, However emphasis will be laid on the categories of
commercial properties ad their characteristics and factors
affecting their values.
2.2 VALUE AND VALUATION
Although the aim of valuer is to provide an estimate of market
value, it should not be assumed that the valuer’s estimate of
value and the market price or market value will always be the
same. Different valuers could well place different values on a
particular interest at a particular time because they are making
estimates and there is normally room, within certain limits for
difference of opinion.
In the majority of cases this is the most serious difference
which should arise between competent valuers in times of
stable market conditions because prices result from estimates
of value made by vendors and purchasers on the basis of
prices previously paid for other similar interest, but in times
10
when condition are not stable more serious difference may
arise. In such instable times the valuer’s estimate of value will
be based on prices previously paid but he must adjust this
basis to allow for the changes since the previous transaction
took place. The accuracy of his estimate will, therefore, depend
on his knowledge of the change and skill in quantifying their
effect.
Unstable times bring into focus the fact that in any market at
any time there are many buyers and sellers, each of whom will
have his own personal views, desires and judgement on what
the commodity in question is worth. This a market constitutes
an amalgam of difference individuals who will strike individual
bargains, so that a “market price” can only represent an
average view of all these factors. Where the commodities are
all different, as in the case of property, the problems of arriving
at this average are multiplied (William, et al 1980).
2.3 CONCEPTS OF VALUES
Value is a word with many meanings, [Turner 1977) says, “The
concept of value is normally referred to as value to the owner”.
11
Value implies capacity to satisfy wants thus, there exists as
many values as there are wants. We have social values, sales
value, economic value and so on, depending on the benefits
enjoyed from the ownership of a property. But the quantifiable
of value the economic or financial value.
Value is not intrinsic but result from estimates made
objectively by able and willing purchasers of the benefits or
satisfaction they derive from the ownership of an interest in
properly”. Value measures not only the relationship between
the supply and demand of a commodity but also its usefulness
and scarcity relative to other commodities. There are two
broad ways of look at value.
Value could be subjective or objective. Subjective value is the
estimate by a property owners of the amount of satisfaction or
utility he gets from the property. Subjective value will include
the social and aesthetic concept of value. Objective value is
the value of a property which when exposed could be said to
be universal, that is, the value of a property so recognized by
12
all prospective purchaser. Objective value is the same as the
economic concept of value.
The relevant concept of value in this dissertation is the
dissertation is the economic concept of value. “for property to
have economic value, it must have utility or usefulness to its
owner” it must have utility or usefulness to its owner” it must
be something that is capable of being possessed, and must be
transferable from one owner to another.
2.4 TYPES OF VALUE
Value can be defined as the sum of the present value of a
stream of income or the present worth of future benefits. It can
be considered from these other points of view.
2.4.1 MARKET VALUE (VALUE IN EXCHANGE)
Market value is the highest value estimated in terms of money
which a property will bring. If exposed for sale in the open
market, allowing a reasonable time to find a purchaser who
buys with knowledge of all uses to which the property is
adopted and for which, it is capable of being used. In other
words, it is the price at which at a willing purchaser would buy
13
the property, both of them adequately informed about the
prevailing market conditions of the property.
Thus, the value of property is identified with its current
exchange value or market price. Market value is dictated by eh
economic forces of demand and supply. An increase in the
demand of properties, not matched by an equal increase in
supply, raises the market value of land and property likewise,
when supply of properties is fixed or increasing and demand
for them is declining, the market value of properties will fall.
The most often used method of determining the market value
of a property is by making reference to recent sales of similar
properties in the same neighbourhood, or in similar
neighbourhoods. But sometimes, the difficultly of find
comparable properties renders this method efficient. And in
some cases where comparable properties exist, there might
not be record of recent transaction in these properties. In
such case, property value is determined by direct comparison
valuation carried out by Estate Surveyors and valuer, who have
expert knowledge on prevailing market forces, legal aspects,
14
building qualities, and some other factor which are necessary
before values are placed on properties.
Different methods of valuation are employed depending on
property type and on the client’s values are given to shifts
from time to time depending on the effect of market forces.
Hence, when we talk of the market value of a property, we are
referring to its open market value at a specified period. This
value might increase or decrease with the passing of time.
The concept of open market admits that the market price
many or may not be rationally established, that is, it is only a
reflection of the market and does not include valuers own
judgement. It also admits that, ‘value’ is used in a restrictive
sense excluding any idea of justness about the level of prices.
These leads to the thesis that, prices are the best indicators of
value.
2.4.2 CAPITAL VALUE
Capital value is the aggregate sum which the property is
expected to fetch if exposed in the market for sale. This means
that the capital value of a property should be equal to the
15
present worth of all future income to be earned by the
property.
Determination of capital valves of properties involves the
estimates of future flows of annual rental values and the
calculation of those rental returns, which will not be realized
until, specified times in the future. Calculation of the present
worth of future annual income involves the discounting of
future values to determine their present worth.
The determination of capital values of property poses a lots of
problems. Estate surveyors and valuers tackle these problems
with their expert knowledge of the factors that might cause
fluctuation in future, annual incomes and with experience
acquired from dealing with landed properties. Thus, the value
attached to a property will depend upon the judgement or
discretion of the valuer who values such property for
investment valuation purpose, a capitalization formular is
commonly used to indicate the discounting of expected future
annual income before the capital value is arrived at. The
capitalization formular is expressed as CV= I x yP
Where;
16
CV= capital value of property
I= Expected annual future income or rent
YP= Rate of return on the investment (Nigel 1984).
The expected annual future rent and rate of return to the
investment are known values used in calculating the unknown
value of property. The above formular applies in cases where
the duration of the incomes being capitalized, is of a
perceptual nature.
Where the duration of the income is for a relative period then,
in addition to the capitalized value of the annual income, we
will have to add the present value to receive a certain income
(on reversion) deferred for the duration of the present income.
Varied circumstances may warrant the employment of another
method of arriving at a capital value. Contractors and residual
method are all different methods of arriving at the capital
value of a property. The method chosen is a particular
situation depends on its particular circumstance. The choice of
capitalism rates of return to an investment is left to the
discretion and judgement of Estate valuer. Several methods of
17
arriving at an appropriate capitalization rate exists but the
most commonly used method is based on the percentage
relationship which exists between the annual income and the
current value of comparable properties. Consideration is also
given to the income quality of the property’s value, the burden
of management, and some other factors which the valuer
might think appropriate to take into consideration.
This the capitalization rate illustrates the relative
attractiveness of an investment. The higher the rate, the more
risky and unattractive the investment is, and the lower the
rate, the less risky and more attractive the investment is. Since
capitalization rate has a direct influence on the value of
property. Proper care should be taken in making the choice.
Wide difference may exists between the people and their
estimate of present and future property values, for example a
property might have a different value from its replica became
of difference in choice of capitalization rate used by the two
different valuers valuing the two different properties.
2.4.3 THE UTILITY THEORY OF VALUE
18
The utility theory of value states that, “Value of any commodity
depends on the utility or usefulness derived from it.” This
theory is fundamentally realistic and useful, but its usefulness
is greatly standardized.
The amount of utility a property owner will obtain from his
property depends greatly on his motives are the most common
motives for property ownership, and where this is the case,
utility can then be measured by reference to the financial
returns from the property. The owner may however have some
other motives his/her motives may be political, social, cultural,
status oriented, pride with which he might hold a property in a
particular area, or a hast of other possible motives.
Thus the utility scale varies with individuals and utility cannot
be standardized for all hence, estimates to owner depending
on motive for ownership of property and how well these
motives are satisfied. It is thus evidence that, practically
speaking, this theory is not very useful in attaching values to
landed property hence, in this study, the values referred to,
are standardize value or open market values.
19
However, the utility theory of value is not an entirely useless or
obscure theory of value to the actual owner but which have no
market and thus no comparable.
2.4.4. CURRENT USE VALUE
This is a concept of value which is used to portray the
relationship between land values and changes in land use. The
current use value of a pieces of land or property is the amount
of income which the property is fetching being put to its
present use. This current use value may change over time
subject to changes in land use and or subsequent development
property. In the case of a subsequent development property,
the current use value is expected to increase due to the
additional works and improvements carried out on the
property.
2.4.5 POTENTIAL USE VALUE
This concept of value is also used to portray the relationship
between land values and changes in land use. “Potential use
value is an estimated value of property subject to projections
of development or redevelopment prospects, and the ultimate
changes in the current use of the property.
20
When establishing the potential use value of a property,
estimates are made as to when the development will take
place, what kind of development it will be, what costs and yield
will be during and after development, and them the discounted
value for the potential use. These are mere estimates because
nobody is certain about any of these factors. When the
projected development finally gets completed and the new
structures are in new use, new current values are established.
These new values reflect the new use of the landed property.
The newly established values might be less or more than the
projected or potential use value attached to the property
before development.
The concept of use value and potential sue values are of great
important to developers of landed property. Therefore, a
developer can be attracted to purchase property, which he
hopes to redevelop in the future subject for the future need or
demand for such development or redevelopment. The potential
use value of the property sufficiently above its current use
value.
21
2.4.6 RATEABLE VALUE
Property rates are taxes levied on occupiers of property in
respect to the annual returns they get from their properties.
The property owners pay these rates to local government
authority in charge of the area. Rateable value is the annual
net value of property, a percentage of which is to be paid as
property rate by occupier of that particular property.
Reteable value is the rent at which a property is reasonably
expected to let in the open market. Assuming that the tenant
pays all the usual rate and taxes, and the landlord takes cares
of repairs, insurance, and other maintenance expense less all
usual tenants rates and taxes, and minus the average annual
cost of increase and other maintenance expenses.
A rate mirage (specified by the rating legislations) is then
applied on the rateable value of a property to arrive at the
amount of property rate an owner should pay. This rate
nairage is sometimes applied (as percentages) on the capital
value of certain types of properties to arrive at the amount of
property rates. Rate review and changes in use of property
could lower or increase value from year to year. Some
22
properties are exempted from property rate and some property
owners are granted reliefs from the payment of property rates.
2.4.7 INSURANCE VALUE
Property owners normally inure their properties to protect their
investment from foreseeable hazardous occurrence. Under an
insurance arrangement with an insurance company, the
insurance company will pay the property owner the equivalent
cost of reinstating the damaged part of his property in the
event of occur the disaster covered by the policy for landed
property is the fire insurance policy. The property owner
having insured his property makes annual payments of a
specified sum to the insurance company (premium).
The basis of a fire insurance valuation is to establish the cost of
re-instating the asset destroyed or damaged by fire, to its
dormer condition. Valuation is carried out before the execution
of the policy to determine or estimate the loss, which may be
suffered in the even of a destruct of the building.
23
The builder or quantity surveyors will carryout estimation of
building cost, and value is normally restricted to historic or
actual cost approximation based on comparable cost of similar
accommodation. The value arrived at, using actual or historic
cost is usually adjusted for inflation.
2.4.8 MORTGAGE VALUE
The mortgage is probably the most important source of credit
for property transaction whereby, the borrower or mortgage or
grants an interest in his property to the lender or mortgage
loan are contained in the mortgage deed.
The borrower retains the right to recover his interest in the
property from the lender on full repayment of the loan and
interests. The lender also his some remedies to protect his
investment in case of default in interest payment by the
mortgage or failure of the mortgage or to repay the loan at the
stipulated time.
The value of the interest, which the mortgage or is offering as
security for obtaining the loan, is importance and has to be
24
appreciate for obtaining such a loan. A valuation is carried out
to establish the value of the security. The value arrived at,
though based on the market value may different from the
market value. This is because additional factors are consider in
making this valuation, viz, the mortgage’s position in relation
to the property and remedies available to him in the event of
default by mortgages, whether the present market value is
likely to be maintained in the future and probable action by
local planning authority which may unfavourably affect the
value of the property in the future.
2.4.9 RENTAL VALUE
Rental value is defined as the rent at which a property would
let at a point in time, it were offered in the open market,
assuming the property being offered is properly advertised.
Rent is the periodic payment made by the occupier of a
property to the owner for the use of land or of his land and
building.
(Richmond, 1985). In practice however, some properties are let
at less than their rental valuer. Some are let at more than their
rental values while, owner-occupied houses are not let at all.
25
The difference between actual rent passing in a property and
that property’s rental value be as a result of one or more of a
number of reasons, such as where a special relationship exist
between the owner of the property and the occupier, as to
premiums, capital expenditure, repairs, insurance and
management, whether there exists a sale and lease back
arrangement, whether the property is let on a long or short
lease and a host of other possible reasons.
2.5 FACTORS INFLUENCING RENTAL VALUE
There are certain factors influencing rental value of
commercial properties. Notably, the factors influencing rental
value as considered by Richmond, 1985 are as follows;
i. Deterioration of the structure.
ii. Effect of adjacent activities
iii. Government and supply
iv. Demand and supply
v. Cost of building materials
Other factors are;
i. Location of the property
26
ii. Property accessibility (Thorncroft, 1965) and
iii. Catchment area
DETERIORATION OF THE BUILDING OR PHYSICAL
CHARACTERISTIC
A property may be physical obsolete which is the wear and
tear of fabrics of the building. The obsolescence may affect
some parts of the building which are difficult to estimate.
Building techniques and materials are constantly changing,
and it is likely that building in the future will not be planned to
last as long as they have in the past, due to the sub-standard
building materials that is being used.
However, in order to ensure a reasonable rental value, it will be
necessary for some money to be expend pairs and decoration
throughout the life span of the building.
EFFECT OF ADJACENT ACTIVITIES
27
This can be referred to as the character of a particular locality.
The rental value of a property may be affected by both existing
and proposed developments within the area. A prospective
investor should inspect the development plan operatives in his
area and consult with the local planning authority so as to be
aware of any development that may affect the value of the
proposed property.
GOVERNMENT POLICIES
Government policies as regard capital, land and handed
property could also influence the rental value of properties.
This could be inform of building codes, rent control, taxes,
national defence measure and policy and other monetary
policies which are created by political forces and which have
on the free use of real estate and prices placed on properties in
the property market. These governmental rules and
regulations tend to force rental values to be above or below
the open market values. For examples, government through its
various policies can increase the rental value of properties by
imposing estate duties, tenement rates and other forms of
taxes.
28
DEMAND AND SUPPLY
Demand factors: It is obvious that the factor of the greatest
importance in fixing rent is demand, the demand for any
particular property will be influenced by a number of factors,
which will be convenient to consider under appropriate
heading;
(i) GENERAL LEVEL OF PROSPERITY
This is perhaps the most important of the factors governing
demand. When times are good and business is thriving, values
will tend to increased. There will be a demand for additional
accommodation for new and expanding enterprises. There will
be a corresponding increase in the money available for new
and improved accommodation and for additional amenities in
connection therewith.
(II) POPULATION CHANGES
The supply of land being limited, it is obvious that an increase
in demand due to increase of population will tend to increase
values on the other hand, when population size diminish in
29
intensity, values will tend to fall. Increase in population within a
locality may occur in various ways. The birth rate may exceed
the number of deaths rate so that there is a natural increase in
the size of the existing population . Alternatively population
may rise locally due to migration of people from other areas to
the locality.
[III] CHANGES IN CHARACTER OF DEMAND
Demand, in addition to being variable in quantity may vary in
quality. Associated with an increase in the standard of living,
there is a change in the character of demand of many property
types. For examples, in houses, many amenities regarded
today as basic requirement would have regarded today as
basic requirement would have regarded as refinement only to
be expected in the highest class of properties two decided ago.
Similar factors operate in commercial properties, the increased
standard of commercial building in the layout, design and
equipment of the building tend to cause many buildings to be
come obsolete and so diminish their rental value.
30
(IV) RENT AS A PROPORTION OF INCOME
In relation to properties, the rent paid may be expressed as a
proportion of the income of the person or organization
occupying the property. It is obvious that, in a free market, the
general level of rent for a particular type of property
accommodation will be related to the general level of income
of the person occupying that accommodation.
(V) RENT AS A PROPORTION OF THE PROFIT MARGIN
In relation to commercial properties and as a rule by tenants,
who expect to make a profit out of their occupation, that
expectation of profit will determine the rent that such a tenant
is prepared to pay. Out of his gross earning, he has first to
meet his expenses, from the gross he has left, he will require
remuneration for his own labour, and interest on capital that he
has to provide, the balance that is left is the margin that the
tenant is prepared to pay in rent and rates. Obviously no hard
and fast rule can be laid down as to the proportion which the
rent will form of profit, but the expectation of profit is the
primary course of the tenant’s demand and the total amount of
rent and rates he will be prepared to pay will be influenced by
31
this estimation of the future trend of receipts and expenses
and the profit he requires for himself.
(VI) COMPETITIVE DEMAND
Certain types of premises may be adapted for use by more
than one trade or for more than one purpose, and there will be
a potential demand from a larger number of possible tenants.
For instance, a block of flats in a convenient position in a large
town may be suitable either as offices or shopping centre
purpose. In a particular locality the demand for office
accommodation and rent that can consequently be expected to
be paid for that purpose may be more or less than the
demand, and the consequently rent that can be expected, for
shopping complex purposes.
In a free market it would be expected that the enterprise
yielding the largest margin out of profit for premises for where
there are competing demand for various purpose, properties
will tend to put to of this rule may be affected by the fact that
town planning legislation will probably restrict the use to which
th property may be put.
32
Supply factors: It ahs already been stated that land differs
from other commodities in being to a large extent fixed in
amount. This limit on the amount of land available is the most
important of those factors which govern supply.
(i) LIMITATION OF SUPPLY
An every country, there are certain quantity of land suitable for
all land use purpose. If these quantitative were entirely static,
the rent would be affected only by changes in demand. In fact,
they are not static, but respond, although slowly, to changes in
demand. There is ultimately, only a certain quantity of land
available for all purposes but increases in demand will cause
changes in the use to which land is put.
(ii) RELATION OF COST TO SUPPLY
It at any time, values as determined by market conditions are
less than cost, the provision of new building will be checked or
may even cease, and build will not recommence until the
disparity is removed. The disparity which exist at any time
between cost and value may be subsequently remove either
by a reduction in cost or by an increase in demand. Over a long
33
period it might be modified by the non-replacement of obsolete
buildings, which might in time bring an excess of demand over
supply and consequent increase in value.
COST OF BUILDING MATERIALS
The increasing cost of land development and construction in
the present day in Nigeria is contributing to the soaring of rent
payment. The increase in cost of building material due to
inflationary trend has an effect on rental value. An investor will
obviously expect a fair return upon his capital cost in form of
“rent” and if rent does not step up with building costs, then the
rate of construction of investment property is likely to slow
down.
LOCATION
The general situation of a property in relation to the case of
access to other land uses namely place of worship, recreational
schools, place of workshops and market and other amenities
increase the rental value. However, not all properties depend
on access to each of these aforementioned factors. To some
extent, in a commercial town, place of work will be a more
34
important feature of location than in a seaside resort where
access to the sea may count for more. The location of property
in the heart of a very viable centre could motivate the
property owner to increase their rental value. In the technical
analysis of location, there are some peculiar site, that has a
special feature that affects property valuers. They are as
follows;
i. The physical and social attractiveness.
ii. Adequacy of civil, social and commercial centres.
iii. Adequacy of transportation.
iv. Sufficiency of utility and service.
v. Level of taxes and special assessment
vi. If the area is subjected to protection against in
harmonious land uses
ACCESSIBILITY
This is achieved either by proximity of location or by good
means of communication. As a means of communication, it
may be upset by external circumstances like growing traffic
congestion, the suspension of transport services of the
diversion of traffic by public authorities.
35
In finding the rental value of a lndeed property, the value is
largely influenced by accessibility factor. Once a property is
not centrally located, it will command less value than the same
property that is centrally located. This accessibility factors
evaluated the net economic cost of moving persons and goods
between two place . it does not only affect the real cost
incurred in the movement but also the real benefit derived.
CATCHMENTS AREA (AREA OF SERVICE)
The area of influence on a particular land use, attracting the
highest level of patronage. In particular, it is often necessary to
delineate, as precisely as possible, the region in which a
particular land use exercise a pull; usually two or three spheres
of influences can be identified the nearer ones with a more
powerful catchments than those further away.
The task of estimating the boundaries of influence is difficult,
because of the presence of other physical competing centres
of attraction. Many of the boundaries however, are definable a
major road, a bridge, a seaport or airway, a hill or other
physical or artificial barriers. Where these indicate the line of
36
demarcation, any trend or development that is likely to break
through time, or which in any way, might upset the established
pattern requires special study. A new road or bridge can bring
enormous changes in the general setting of particular land use,
either by extending or diminishing its catchments area. It is
often possible to exercise judgement in identifying that area
where the property is likely to command a pulling power of
close on hundred percent of available and perhaps one of more
area may be an estimated percentage of the total. One way in
which be done is to compare the pattern of sales of
“convenience goods” and “comparison goods”. Shoppers are
likely to obtain their everyday necessities near at hand but will
travel further to centres that offer a choice for household
goods, other consumer durable and luxuries.
2.6 TYPES OF RENTS
1. GROUND RENT
37
It can be referred to as payment made by a lessee to a lessor
for the use of bare land usually for a long period of time. Here
the lessee erects building on the land hence the ground rent is
said to be secured since the rent passing on the building will
far exceed the ground rent.
2. CONTRACT RENT
It is the actual payment which the owner receive from their
tenants or the occupation or use of their properties. It is solely
determined by contractual arrangements made between the
two parties that is landlord and tenant. Generally, contract rent
includes element of interest of return on capital and value is
economically concerned with this.
3. ECONOMIC RENT
Richardo defines it as the surplus income earned by a factor of
production over the minimum necessary to bring to it into
production. Generally, the term is applicable to land, so
economic rent also refers to any excess of earning over
transfer earnings. It is otherwise called scarcity rent.
38
4. RACK RENT
This is the current open market letting value of the amount for
which premises is let in the open market at a time under
consideration. Therefore, it refers to the greatest amount that
a premises commands in the open market.
5. VIRTUAL RENT/SITTING RENT
A term which is used to describe the true annual cost of land or
building to a lease. It is thus the rent reserved in the lesse and
also. The annual equivalent (AG) of any capital sums that the
lessee pays as premium or has expended on the premises
from time to time.
When a person expands capital on property in which he has
only a terminate interest, it must be remembered that not
only might this capital invested elsewhere have borne interest
at fair rate percent, but also that an annual sinking find ought
to be provided to replace this capital by the time the party’s
interests in the property expires.
39
6. PROFIT RENT
This describes the differences between the rack rent or full
rental value and the head or rent reserved under a lease of the
premises. This is the gain that accrues to the tenant.
7. QUASI RENT
If a factor of production, e.g. labours earned more than normal
rewards, then it is termed as quasi rent. This is because the
free-flow of factors around the market is interrupted by some
sort of economic friction.
8. EXCLUSIVE RENT
If a factor of production, e.g. labours earned more than normal
rewards, then it is termed as quasi rent. This is because the
free-flow of factors around the market is interrupted by some
sort by economic friction.
9. EXCLUSIVE RENT
It refers to a rent which makes the tenant responsible for
outgoing. It is also called not rent.
40
10. INCLUSIVE RENT
This refers to a rent payable or paid by the lessee which takes
care or include outgoings like repairs management fees and
insurance premiums. The amount so paid makes the landlord
to carryout or foot the bill of outgoings. It is also called gross
rent.
11. PERPERCORN RENT
It is a taken rent payable as consideration to a landlord, being
either of a nominal amount of money or more imaginatively a
peppercorn. In modern times, this usually occurs where the
tenant has paid a premium to the landlord.
2.7 MEANING AND TYPES OF PROPERTY
Property from an estate management point of view is the
right and interest exercised over a pieces or parcel of
land and all that is attached to the land, natural and
manmade structures that are above, on or under the said
land.
41
RESIDENTIAL PROPERTIES
These are buildings, which provide living accommodation
to its dwellers. It protects them from adverse whether
conditions and trespassers. Examples of such properties
are tenement buildings, block of flats, terraced houses,
semi detached house, detached houses, bungalows and
marionettes Houses.
COMMERCIAL PROPERTIES
These comprises mainly of shops, offices and show rooms
are usually of profit oriented purposes. The principal
factors affecting their value can be classified broadly into
the quality and quantity of broadly into the quality and
quantity of accommodation and situation of the premises.
Commercial properties incorporate those that render
retail and wholesale service, provide executive office
space or handle other similar functions. They can be
found in the following structural forms e.g. converted
dwelling houses, mixed development, purpose built office
accommodation which should have accessibility to the
common and medical clinics.
42
Commercial properties have to be situated is a central
business district so as to enjoy complementary
advantages and this depends on the purpose for which
they are required, as to look for a good location, for
example, insurance firms, merchant banks, micro-finance
banks and both other commercial enterprises are
concentrated in a particular locality such as Lagos
metropolis.
Office spaces comprise of suites, while floor or flat let,
can be used for transacting business. It also varies from
one room unit or suite of room to suit of large purpose
built office block. Some are on the ground floor of
buildings haring direct access to the street for example
banking hall. Some offices may also have double
frontage. There is usually evidence of rent as offices are
generally let out a rate or amount per square metre of
internal lettable space.
INDUSTRIAL PROPERTIES
43
These are properties that are acquired for special
manufacturing or processing purposes. The main factors
in sitting of an industrial premises are its nearness to raw
materials, labour and market. Example of such properties
include factories and warehouses.
AGRICULTURAL PROPERTIES
Properties engaged in the production of food and
livestock. They include farms, fishery, cattle rearing,
poultry, piggery amongst others.
SPECIAL PURPOSE PROPERTIES
These include properties not mentioned above but are
used by person in one form or other, such as, schools,
hospitals, recreational properties, cementry properties,
transportation lands, institutional properties,
transportation lands, institutional properties, services
areas amongst others.
2.8 THE PROPERTY MARKET AND USE
CLASSIFICATION
44
The term “property market” does not connote a physical
located market where buying and selling of products take
place. The proper market consists of products take place.
The proper market consists of the sum total of the
transactions of buying, selling and letting of real property.
The term can also be used to refer to the free interplay of
the forces of demand and supply on real property. The
property market deals in right and interests in land and
buildings.
Therefore, the property market should not be viewed as a
particular place though, we recognize the local nature of
real estate markets and refer to them by name of the
locality in which the property is found plays an important
role in the life of real estate investors, valuers, estate
agents, economists and other allied professionals existing
spaces, adjusts the supply of land and the demand for
space in quantity and quality. It also determines land use.
2.8.1 VALUE AND ITS DETERMINATION IN THE
PROPERTY MARKET
45
Value evolves from and changes with the degree of utility
and scarcity of an object in relation to man’s desire for
use and possession. Real property value arises from the
power of real property to satisfy man’s needs and desire
as an indispensable accomplishments to human life and
activity and obeys the same economics law as other
goods and services whose value are determined by the
interaction of forces of demand and supply.
The creation, modification, maintenance and destruction
of property value is subject to the interplay of social
ideals and standards, economics adjustments and
changes, political regulations, physical or natural forces
and other forces which motivate the activities of human
life. This study is concerned with the trends of value of
real property transformed into monetary term which
occupiers of commercial properties.
2.8.2 CHARACTERISTICS OF REAL PROPERTY
MARKET
(i). Heterogeneity
46
Every property occupies a unique location, and there are
many other instance of possible difference in design,
condition, size, aspect and so on it is true that some
properties and close substitutes for one another, but on
the other hand, it is true that certain types of property
may present very rare opportunities for acquisitor and
therefore be virtually unique as an investment
opportunity.
(II). INVISIBILITY
Another feature of property which distinguishers it from other
investments is its frequent indivisibility and the relative high
cost of each indivisible unit. This often result in property being
unattainable as an investment medium for the small investor,
except for his own occupation through acquiring shares in
property companies through property binds or indirect means.
(III) INELASTICITY OF SUPPLY
A fundamental economic features of property is the difficulty of
varying its supply. The physical overall supply of land is
47
virtually fixed and the mix of various land uses is difficult to
alter, because of planning controls.
Due to the time taken to obtain planning permission, arrange
finance, construct buildings and arrange disposals, the
development in demand. It is not always viable or practicable
to demolish or change buildings to meet such a reduction. This
lack of responsiveness (or inelasticity of supply) in the industry
leaves it abnormally vulnerable to economic booms and
slumps.
(IV). HIGH COSTS OF TRANSFER
The incidental cost of dealing in property and high
relative to those of other investments. Investigations of
title, the need for a formal contract, and the frequent and
to create a mortgage are reason for employing a solicitor
while, the desirability of a professional opinion of value of
a report upon physical condition or to appoint an agent to
handle advertising and negotiations, all add to the cost of
transfer.
(V). SPECIAL RISKS
48
These includes:
(a) Physical risks such as fire, earthquake, flooding
wear and tear and user damage.
(b) The risk of liability of third parties due to
defective premises.
(c) The financial risk of granting lease for specified
periods of time with or without rent reviews.
(d) The economic risk that a property will become
obsolete in terms of design or purposes.
(VI). DECENTRALIZED MARKET
Unlike the stock exchange, the property market is not a
central market property is normally bought and sold
through agent acting in, and familiar with a particular
locality. The exception to this is with regard to the major
firms, who operate nationally and even international in
purchase, sale and letting of investment for major clients.
(VII). IMPERFECT MARKET KNOWLEDGE
Transaction involving certain types of property are
frequent, and the details concerning them are kept
49
secret. This leads to lack of information about transaction
in certain sectors of the market.
(VIII). GOVERNMENT INTERVENTION
In view of the political significances of property,
government intervention is life. The following list gives an
indication of some of the main forms that this takes.
(a) Rent control and security tenure
(b) Discriminating taxation and relief from taxation.
(c) Control of credit.
(d) Control of land use and control of the construction,
maintenance and use of buildings,
(e) Compulsory purchase and public developments.
(IX) PERPETUITY
Land is durable and it is the habit of man and so he who owns
part of it has an investment is something which always has
been and (hopefully) always will b e absolutely to the needs of
man.
(X) THE ABILITY TO CREATE INTEREST IN PROPERTY
50
An interest in property may be defined as a “bundle of rights”
over that property, and it is these interest in property which
are bought and sold rather than the actual properties
themselves. These are from interest, leasehold interest to
mention a few .
(XI) LOCAL IN CHARACTER
fixity of location cause the market for real estate to be local in
character. As a commodity real estate cannot be moved from
place to place. Demand must come to the parcel or property.
An over supply of land and land improvements in a mid-
western state is of no avail to fill a market demand for like land
and improvements in another region or metropolitan centre-
real estate must be employed where it is, and because its
fixity, its geographical locality, it is extremely vulnerable to
shifts in local demand.
(XII) USE OF SPECIALISTS
Fixity in location again do creates the need for real estate
specialties who is familiar with local and environmental market
51
condition and with the applicable physical economic, and legal
characteristics of real estate as a commodity. Examples
include estate agents, estate valuers, brokers, lawyers,
engineers and a host of others.
(XIII). PAUCITY OF MARKET PARTICIPANTS
The number of participation in the market is limited by finance.
Not all who would love to purchase land and rich enough to
buy a plot.
2.10 CATEGORIES OF COMMERCIAL PROPERTIES
commercial premises as earlier mentioned include shops,
stalls, showrooms and offices. In the case of shops, the chief
consideration affecting rent is likely to be the number of
persons passing the premises in the course of the year and
the type of goods they are likely to be able to afford to buy. In
the case of offices, the prestige, which fashion may give to a
52
particular district and convenience of situation and access for
business purposes generally, will largely determine, rent.
SHOPS
Shops are usually very sound investment. They vary
substantially in size and type, from small shops in secondary
position to town centre shops on a number of levels and
corner pieces.
As already indicated the chief factor affecting values is that of
position and its effect on trade. The prospective tenant or
purchaser is likely, in nearly every case, to attempt some
estimate of the trade in those premises in that position.
The degree of accuracy that he will attempt to achieve will
depend largely on circumstances. It is well know that many of
the bigger concerns, with a large number of branches, have
arrived from experience at certain methods of assessing with a
fair degree of accuracy, the turnover they are likely to be able
to achieve in a given shopping position. From such an
estimated turnover it is necessary to deduct the cost of the
53
goods to be sold, from the gross profit remaining will fall to be
deducted wages, overhead charges and a margin for profit and
interest on capital. There remain a balance or residue, which
the tenant can afford to pay in rent, rates and repairs.
The use of in rent, premises for a particular retail trade can,
with some expectation, be changed to its use for another retail
trade without the necessity for obtaining town planning
permission. If therefore premises are capable of occupation for
a number of different purposes, and are likely to appeal to a
member of different tenants, there will be competition between
the latter, and the prospective occupier whose estimate of the
margin available for rent, etc is largest, is likely to secure the
premises by tenancy or purchase. Factors that affects the
investment potentials of shops, are;
i. Position- Shops in good position always let readily at
reasonable rents.
ii. Types of premises and their suitability for the display
and sale of goods.
iii. Types of tenant- It ahs an important bearing on the
security of income.
54
iv. Terms of lease- the shop property may be let on
various terms, on one hand, the tenant may be
responsible3 for repairs and at the other extreme, the
landlord may be responsible. In between these
extremes a variety of different responsibilities is found.
Other factors influencing values and uses are (Ifediora
1993)
i. Proximity to customers
ii. Traffic street
iii. Good paving sidewalks and clean streets
iv. Ease of access
v. Adequate parking pace
vi. Adequate location amidst similar utilities and
vii. Good and level street for housing
OFFICES
The term above refers to premises, which are used for
professional or trade purpose or where clerical work is done,
but excludes premises which are sued for the display or sale of
55
goods. There are purpose bulk offices and converted dwelling
houses, purpose built offices which are modern buildings
constructed specifically for offices, containing, security
personnel, generating sets amongst others.
As regards letting, it is generally better to let a block as a
whole than if it is let in suites as it creates management
problems for the landlord and the provision of services in some
form or another is generally necessary. If the Landlrod is
prepared for such problems of management, the service
charge method should be sought.
The factor affecting the values of this property are;
(i) Location factors- the positioning of office
properties is less crucial than that of shapes
offices should be located in an area served by
good transport and other facilities, but the precise
position within that general location is generally
of less importance.
(ii) The income- The annual value is usually
considered in relation to area, and in
56
advertisement of floor space to let in office
building. The rent is often quoted at a much per
unit of floor area.
(iii) Terms of Tenancy. Lettings of today almost
always are exclusive of rates. The cost of external
repairs, maintenance of stairs case, lifts and
other parts in common use, in the case of building
let in suites will be covered by a separate service
charge. The tenants may be liable for all repairs
to the interior of the offices. Where the whole
building are let to a single tenant, the lease is
normally a full repairing and insuring one. Other
factors include,
i. Similar surroundings.
ii. Ease of access from other parts of town
iii. Accessibility to principal financial institutions, banks,
exchanges, clearing houses.
iv. Ease of intercommunications
v. Parking spaces and facilities.
57
2.10.1 INFRASTRUCTURAL FACILITIES REQUIREMENT BY
COMMERICAL PROPERTIES
These are social amenities provide by the government,
commercial property owner and/or occupiers and the
general public to improve operation within these properties
and their values. They come in the following forms:
(i) Provision of goods roads.
(ii) Provision of electricity
(iii) Provision of generating sets (where applicable)
(iv) Provision of market centre
(v) Provision of market services
(vi) Provision of telephone services
(vii) Provision of lifts (where applicable)
(viii) Provision of fire alarm services
(ix) Provision of post offices
(x) Provision of hospitals and
(xi) Provision of pipe born water.
58
CHAPTER THREE
3.0 RESEARCH METHODOLOGY AND STUDY AREA
3.1 INTRODUCTION
It is the objective of this research to make an analysis of trends
in commercial property rental value in Lagos metropolis from
2000-2009.
There has been noticeable increase in property value in Lagos
metropolis within this period. This observation could be
59
considered to be a mere assertion and that this research study
is to investigate. I this research, theoretical evidence, facts and
figures will be used to prove that the stated hypothesis. The
success, reliability an validity of a research is very much
determined by the collection, collation, interpretation and
analysis of data. There are many method of collection of data,
However the method to be used depends on the nature of the
study.
3.2 QUESTIONNAIRE ADMINSTRATION
3.2.1 QUESTIONNAIRE DESIGN
In the preparation of the questionnaire, There are the
fixed response type, the open and type and rating scale
question.
1. Fixed Response Type: The fixed response
questionnaire is design in such a way that
a number of alternative answers are
provide for a question. The respondent is
required to choose from the best answer
that will be conform to own line of thought.
2. Open- End type: The open and type
response questionnaire is the type that
60
allows every respondent to provide
answers in his own option. He is not
restricted to any response options.
3. Rating scale Question: In this type of
questionnaire the questions are
constructed in such a way that the
respondents will have enough alternative
from which he/she can make a choice of
adequate, not adequate or no idea.
3.2.2 QUESTIONNAIRE DISTRIBUTION AND
COLLECTION
The questionnaire were administer by hand to the
respondent. This is because it has been observed that the
longer it remain with the respondent, the more time he
spend to provide answer to the questions which also
serve the time of both parties i.e. the researcher and the
respondent but most especially the respondent where he
is a and the respondent but most the respondent but
61
most especially the respondent, where he is a very busy
person.
3.3 SOURCES OF DATA
The data used in this dissertation were obtained from
primary and secondary sources.
3.3.1PRIMARY DATA
The primary data used in this research are the
information gather and obtained through direct interview,
personal observation and filling of tables.
DIRECT INTERVIEW
Personal interviews were made with some occupiers of
commercial properties within Lagos metropolis as well as
Estate Surveyors and valuer to get information on rent paid
over years.
PERSONAL OBSERVATION
62
Personal observation were also made on some street within the
selected area in Lagos metropolis in order to ascertain the
general aesthetics of the area and the commercial property
types were also identified.
TABLES
A tables was designed and distributed to firms of Estate
surveyors and valuers and some individuals (consisting of
Landlords and occupier) in Lagos metropolis for the purpose of
obtaining rentals values on commercial properties from 2000-
2009 respectively.
3.3.2 SECONDARY DATA
This consist of assembled information relating to the topic of
the dissertation. This work information obtained from relevant
textbooks, past project, magazine and unpublished papers.
3.4 PROCEDURES FOR DATA ANALYSIS
After collecting the data, the researcher will find the
similarities or otherwise in the responses to the table. The data
63
presentation and analysis is in tabular form expressed in
ranges.
3.5 SAMPLE TECHNIQUES AND SAMPLE SIZE
A sample is precisely a part of the population. This sample
includes any commercial property as well as Estate firms in
Lagos metropolis for the purpose of this research, the simple
random sampling method was adopted through the use of
table of random number.
3.6 CHARACTERISTICS OF THE POPULATION OF STUDY
The researcher is interested in studying the nature of a
phenomenon as exhibited in commercial property types within
Lagos metropolis. A small size population sample of estate
firms and individuals within Lagos metropolis was employed for
the purpose of this research.
A population is made up of all conceivable elements subjects
or observation relating to particular phenomena (property
rental values) of interests to the researcher. All conceivable
elements and subjects in this research is therefore commercial
64
property type in Lagos metropolis as well as chosen firms of
estate surveyors and valuers. All this set of people will be
administered questionnaire in order to acquire the needed
information.
3.7 STUDY AREA (SAMPLE FRAME)
For the purpose of this project, the selected study area which
will represent Lagos metropolis was grouped into the following
major areas namely.
A. IKEJA AREA, DIVIDED INTO
i. Awolowo Way,
ii. Oba Akran,
iii. Toyin Street and
iv. Allen Avenue
B. LAGOS ISLAND, GROUPED INTO
i. Broad Street
ii. Idumota Area
iii. Moloney and
iv. Bamgbose
HISTORICAL BACKGROUND OF LAGOS METROPOLIS
65
Modern day Lagos is now a state situated in south-western
Nigeria. It is bounded in the west of the republic of Benin to the
north and east by Ogun State with the Atlantic ocean providing
a costline on the south and Lagoon has many Obas’s.
It has a total of 3,577 square kilometer. 787 square kilometer
is made of Lagoon and creeks including Lagos Lagoon, Lagos
harbour, five carries creek, Ebute-mtta creeks, Port-Novo
creek, new canal Badagry creek. An area of 455km2 of this is
water, wet and land and main grove swamps.
Modern days Lagos was founded by the Bini in the sixteenth
century. It was later called Eko. The Portuguese explorer Ruy
de sequerra who visisted the area in 1472, named the area
around the city Lagos de Curamo”, indeed the repesent name
is Portuguese for “Lake” . An alternate explanation is that
Lagos was named for Lagos, Portugal. A maritime town which
at the time was the main centre of the Portuguese expectation
down the African coast and whose own name is derived from
the celtic word Lacobriga.
It was a major centre of the slave trade until 1851, when the
untied kingdom, which had abolished slavery in 1807, captured
the city. It was formally annexed as a British colony in 1861.
66
The reminder of modern-day Nigeria was seized in 1886.
when the colony and protectorate of Nigeria was established in
1914 Lagos was declared its capital. Lagos experienced rapid
growth the throughout the 1960 and 1970s as a result of
Nigeria’s economic boom prior to the Biafran War. This
continued through the 1980s, 1990s, up till the present date.
It is significantly to note that Lagos grew at a rate of 3.3% per
annum between 1901 and 1950 but its growth rate per annum
between 1950 and 1963 had risen to 18.6%. By the 1963
census, a population of 1, 122, 7333 was recorded for
metropolitan Lagos, which at that time did not include Ikorodu.
While by 1971, some Nigerian urban centres were growing at
an annual rate of 2.3%, Lagos metropolis was experiencing a
growth of 14% (Lagos Executive Department Board 1971). By
1978, the population of metropolitan Lagos had risen to 3.8
million and by 1979 it was 4.13 million. The various economic
activities encouraged population growth. This phenomenal
population growth was not due to natural increase alone but
also to rural-urban migration and foreign immigration. The
immigrants are mainly in their reproductive years and are in
search of better opportunities. Lagos remained the nation
67
administrative capital till December 1991, when the seat of the
federal government moved to Abuja. However, up till now is
still the nations nerve centre from economic activities. Lagos
continue to grow and by 1997 the metropolis had a population
of 11.85 million, by the year 2001, it was estimated to haven a
population of 13 million. By the year 2015, the population of
Lagos Metropolis is projected to 24.4 million, and becoming the
third largest city in the world.
The rapid population growth in Lagos metropolis poses a
number of problem in the urban area, which include pressure
on the hand, shortage of housing, slum, urban congestion and
failure of the urban community as a whole to adapt to
changing conditions occasioned by the influx of migrant to its
institutional and social services. Population increases has a
direct impact on land use. It results in the demand for more
land for industrial, commercial, recreational, residential and
institutional purposes, as well as for other community facilities.
As Lagos grows, it has become a centre of gravity for all
professionals, semi-professionals, school skilled and unskilled
labour throughout its catchments area. The rate of statal,
rural-urban, and intra-continental migration of job seeker into
68
metropolitan Lagos has overburdened its housing facilities,
transport, system, telecommunication network, road articles,
electricity and water supply and shopping facilities.
CHAPTER FOUR
4.0 DATA PRESENTATION AND ANALYSIS
4.1 INTRODUCTION
Data presentation and analysis is embarked upon with a
view to describing, classify and finding out the existing
relationship between the variables of study in order to
draw a logical conclusion.
In this chapter, attention is paid to the orderly
presentation and analysis of data through the various
ways in which data was collected via the administrative of
questionnaire.
69
4.2 DISTRIBUTION OF QUESTIONNAIRE
A total of one hundred (100) copies of questionnaire were
distributed. Seventy (70) copies to the occupier/owners
while thirty (30) copies were administered on the Estate
Surveyors and valuers.
The record of respondents is as shown in table 4.1 below.
Table 4.1 Administration of Questionnaire
Respondents
No of questionnaire administrativ
e
No of questionnaire retrieved
No of
questionnair
e retrieved
%
responden
t
Occupier on
Land Island
35 30 5 35%
Occupier on
Ikeja
35 28 7 33%
Estate firm 30 20 10 24%
Total 100 78
Source: Field survey 2010
70
A total of seventy-eight (78) response were retrieved
from respondent on administering a total of 100
questionnaire which represent 92% which appears
suitable for analysis.
4.3 PRESENTATION AND ANALYSIS
The table below shows the trends in rental values of
commercial properties (offices) in Lagos Island between
2000-2009 and it is measured per/m2.
71
TABLE 4.2
Trend in rental value of commercial property (office) in Lagos metropolis
=N=(per/m2)
Areas 2000 2001 2002 2003 2004 2005 2006 2007 2008
Broad 5500-
7000
5500-
7000
5500-
7000
7000-
15000
7000-
15000
10,000
18,000
10,000
18,000
20,000
25,000
20,000
25,000
20,000
25,000
Marina 5500-
7000
5500-
7000
6,500
9,000
8,500
10,000
8,500
10,000
12,000
15,000
12,000
15,000
18,000
20,000
18,000
20,000
18,000
20,000
Ofin 2500
4,000
3,500
5000
3,500
5,000
5000
7,000
6,000
7,500
9000
12,000
10,000
15,000
15,000
18,000
15,000
18,000
15,000
18,000
Nnamd
i
Azikwe
2,500
4,500
4,500
6,000
4,500
6,000
7,000
10,000
7,000
10,000
10,000
12,000
10,000
12,000
15,000
18,000
16,000
18,500
16,000
18,500
Source: Field Survey 2010
72
The trend of commercial (office) property value in Lagos
Island increases in a peculiar manner which is greatly
influenced by the economic situation of the country. The
increase is not constant throughout the period under
survey rather the values were increasing at the beginning
of the decade and later reached their peak. The peak
rental figures attaches to ground floor spaces of banking
Hall and shops etc, least rental figure attaches to the
upper floor of properties with poor services facilities as
well as those inadequate function at maintenance.
The rental of office on Broad Street rose in 2003 and
remains so in 2004 but reached its peak in 2007. The
trend was the same with marina, the rental rose in 2003
and also reached its peak in 2007and his been the same
since then. Ofin has a different trend with less price but
start rising in 2005 and reach it peak in 2007 and
remained the same. Likewise Nnamdi Azikwe, its value
increased in 2003 and later reached its peak in 2007.
73
Table 4.3The trend In rental value of commercial properties (Shop) in Lagos Island between 2000-2009
and its is measured by annum.Trend in commercial property (shop) rental value Lagos metropolis
Areas 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Idumota 120,000
-
150,000
120,000
-
150,000
140,000
-
160,000
140,000
-
160,000
140,000
-
160,000
150,000
180,000
150,000
180,000
180,000
-
250,000
250,000
-
500,000
250,000
500,000
Nnamdi
Azikwe
70,000-
90,000
70,000-
90,000
80,000-
120,000
80,000-
120,000
130,000
160,000
140,000
170,000
140,000
170,000
180,000
250,000
250,000
450,000
250,000
450,000
Moloney 30,000
50,000
30,000
50,000
50,000
70,000
50,000
70,000
60,000
80,000
60,000
80,000
75,000
110,000
75,000
110,000
100,000
150,000
100,000
150,000
Lewis 35,000
55,000
35,000
55,000
50,000
70,000
50,000
70,000
55,000
80,000
55,000
80,000
80,000
100,000
80,000
100,000
95,000
150,000
95,000
150,000
Source: Field Survey 2010
74
This category of commercial property is not common on
marina and broad street as they are dominated by purpose
built high rise office structures but presently the few available
shops are let between N250,000-N500,000 per annum. The
trend of shop value within Lagos Island has been on the
increased since the beginning of the decade. Although the rate
of increase is not constant and there are some instance of
price stability.
(IKEJA)
Table 4.4 shows the increase in rental values of commercial
properties (offices) in Ikeja between the year 2000- 2009 and it
is measure or rated by per m2 trend in rental value of (office)
in per.
75
(Table 4.4)
Trend in rental values of commercial properties (Office) in Lagos metropolis in Ikeja
=N= (per/m2)
Areas 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Awolowo way 1400
1600
1400
1600
1800
2000
1800
2200
1800
2200
2600
3000
3300
3500
3300
3500
3500
4500
5000
6000
Allen Avenue 6500
7500
6500
7500
8500
10,000
85,000
10,000
85,000
10,000
9500
11,500
9500
11,500
13000
15000
13,500
15,000
14,00
16,000
Toyin Street 4,50
0
5500
4500
5500
5500
6500
55000
65000
6000
8000
6000
8000
7500
9000
7500
9000
10,000
12,000
10,000
12,000
Oba Akran 4000
6000
4000
6000
65000
7500
6500
7500
7000
8000
7000
8000
7500
9500
7500
9500
10,080
13,000
10,000
13,000
Source: Field Survey 2010
76
From the above table Awolowo way record an increase in 2003
and it was steady also in 2004 but later witness increased in
value in 2007 while the increase later reached it peak in 2009.
Allen Avenue has a different trend, it value increased over the
years since the beginning of the decade and also gotten to its
peak in 2009.
Toyin Street started increasing in 2004 and was stable in 2005
but later increased in 2006 till it get to its peak in 2008. Oba
Akran also has the same trend along with Toyin Street with
little or no difference.
Table 4.5 show the trend in rental values of shops in Ikeja and it
is measured or rated per annum
77
Table 4.5
Trend in a rental value of commercial properties (shops) in ikeja =N= per annum
Areas 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Awolow
o way
45,000
55000
45,000
55000
50,000
60,000
50,000
60,000
65,000
90000
65,000
90,000
75,000
100,00
0
75,000
100,00
0
110,00
0
150,00
0
110,00
0
150,00
0
Allen
Avenue
140,00
0
160,00
0
140,00
0
160,00
0
150,00
0
200,00
0
150,00
0
200,00
0
220,00
0
280,00
0
220,00
0
280,00
0
250,00
0
350,00
0
250,00
0
350,00
0
350,00
0
500,00
0
350,00
0
500,00
0
Toyin
Street
45,000
55,000
55,000
80,000
70,000
100,00
0
90,000
100,00
0
100,00
0
150,00
0
100,00
0
150,00
0
140,00
0
200,00
0
140,00
0
200,00
0
220,00
0
300,00
0
220,00
0
300,00
0
78
Oba
Akran
75,000
90,000
75,000
90,000
75,000
90,000
95,000
110,00
0
95,000
110,00
0
100,00
0
130,00
0
100,00
0
130,00
0
120,00
0
160,00
0
140,00
0
200,00
0
140,00
0
200,00
0
Source: Field Survey 2010
79
Trend in Awolowo way record an increased in 2004 and it was
stable in 2005 but later reached its peak in 2008 moreover, value
is much higher at the other side of Awolowo way which is the
Central Business District (CBD).
Allen Avenue has been on the increase since the beginning of the
decade, the rate of increase is constant in 2004 and 2005 but
later rise in 2008.
Toyin street has a similar trend with Awolowo way only at the
beginning of the decade but the rate change in 2002 till it gets to
its peak in 2008.
Oba Akran has a different trend, its value was constant in 2000,
2001 and 2002 but later rise in 2003 and the increased did not
stop until it get to its highest in 2008.
80
4.4 ANALYSIS OF THE INFLATION RATE TO RENTAL
VALUES OF COMMERCIAL PROPERTIES IN LAGOS
METROPOLIS
The real estate sector as a whole, is prone to adverse
effect of economic conditions prevailing during a
depression. The most obvious features of economic dis-
equilibrium on real estate sector are, rent default,
stagnant rent, slow growth rate of rent, closure or
reduction in capacity of business strength and poor
maintenance of properties due to increasing maintenance
cost.
The fall in the real income of the citizenry coupled with
increasing cost of living invariably, makes demand for real
estate to be determined by affordability and frequent
sustainability rather than necessity. Occupiers who cannot
pay higher rent due to increase pressure on the disposable
income will inevitably settle for lower type of
accommodation. A good example is happening in Lagos
Island where there is a high rate of voids as occupiers are
81
moving out of the high valued accommodation to lower
valued ones. As occupants move out of accommodation
stated earlier, the demand for them will reduce and at the
same time their prices will reduce. The reduction of them
remains until demand exceeds supply. The prices increase
and they become no longer affordable.
GENERAL OBSERVATION
DEVELOPMENT
Lagos metropolis is the centre of economics and
commercial activities in Nigeria as a whole. It is associated
with high-technologically-developed buildings and high
rise structures.
PLANNING
Planning standards are conformed to during and after
development because apart from the town planning and
building regulations, it also cretates an avenue for revenue
for local and state governments in terms of acceptance
and defaults.
CONCENTRATIONS
82
The researchers observed that high valued commercial
properties are concentrated in Lagos Metropolis.
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, RECOMMEDATIONS AND
CONCLUSION
5.1 INTRODUCTION
The analysis in the following chapter has fulfilled the purpose
of this research work. This chapter will include the summary,
conclusion and recommendation of the analysis based on the
research objective.
5.2 SUMMARY OF FINDINGS
Under this study, the following situation are found to have
caused and resulted to the trend in commercial property value
in lagos metropolis from 2000-2009
- There has been a significant increase in commercial
property development .This is usually in the form of
office building, banks ,shops, and supermarket etc which
has cropped up in almost every part of the study
83
area .Most of the development are in the nature of
conversion ,renovation and re-building.
- Financial institution have not been willing to give out loan
for development, this is mostly due to the high rate of
default on the part of developer or investors in redeeming
loans. Where loans are given, the interest is usually very
high.
- The problems of finance ,land acquisition and high cost
of construction are attribute to the increase in the trend
of commercial property in Lagos metropolis.
- The study also showed that the trend are directed
upward, some value tend to be stabilize, some fall and
rise again
5.3 RECOMMENDATIONS
1. Government should endeavour to envisage full impact of
their economic, fiscal and monetary policies on the
various sectors of the economy before embarking on such
policies. The general impact of the policies should be
evaluated comprehensively.
84
2. Office space, which is above 1000 m2, should be designed
with level of flexibility during construction stage to be
able to accommodate two or more tenants conveniently
should there be difficult in getting a single tenant. The
later, which is becoming more and more difficult to
achieve in today’s market.
3. Office centres should be incorporated in development
plan for regional economics development.
4. Rent control should be designed in such a way that it will
favour both owners and occupiers, that is supply and
demand will be at equilibrium.
5. Obsolescence should be avoided through repairs,
maintenance and flexibility of designs.
6. The government should find out ways by which the
masses could easily get building materials in the locality
and encourage their use. Local building materials are
better substitutes or their modern counterparts. They are
durable and cheap.
85
5.4 CONCLUSION
Conclusively, rental trends have effects on commercial
property market, when rent are low, more people can afford to
rent accommodation but when rents are high, and people find
alternatives which have low rent.
86
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