The Trends in Commercial Property Values in an Emerging Real Estate Market: The Case of Ibadan Metropolis, Nigeria

Abstract

This study aims at examining the trends in commercial property's rental, capital and returns values from 2002 to 2014 in Ibadan metropolis, Nigeria with a view to providing information for investment decision making. DESIGN/METHODOLOGY/APPROACH:Questionnaire survey was conducted to collect data on rental and capital values from investments in commercial properties in Ibadan metropolis. The data were collected from partners/branch managers of Estate Surveying and Valuation Firms in the study area. There were 56 estate surveying and valuation firms in Ibadan with an average of 2,072 commercial properties in their management portfolios (an average of 37 properties in each management portfolio). A total enumeration of the 56 firms was conducted using structured questionnaire; however, only 31 questionnaires were completed and returned for analysis (representing 55% response rate). Descriptive statistics was used in analysis of the data obtained, hence the use of frequencies; percentages; income, capital and total returns formulae; weighted mean; growth rate formulae and trend analysis. FINDINGS: The study found that there was a steady and continuous increase in both the rental and capital values of the selected property types throughout the study period. This was depicted by the trendlines generated from data obtained from the field as well as the annual average growth rates calculated (8.35%, 8.1%, 10.3% and 6.3% for office rental values, shop rental values, office capital values and shop capital values respectively). The income, capital and total returns for investments in office property type were observed to have an average of 4.40%, 6.58% and 10.98% respectively. Similarly, the average income, capital and total returns on investments in shop property type were seen to be 4.62%, 5.19% and 9.82% respectively. The income, capital and total returns values indicated positive returns values for both office and shop properties throughout the study period. PRACTICAL IMPLICATIONS: Due to the dynamism and property market immaturity associated with emerging property markets of developing nations, investors may want to ascertain the trends of returns behavior of real estate investments so as to serve as a guide for their investment decision making, hence this study. ORIGINALITY/VALUE: This study is unique as it gathered historical data on commercial property investments behaviour and made future forecast or predictions of possible investment behaviour of returns values in an emerging property market which could serve as a guide to property investors in making investment decisions.

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