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AN ASSESSMENT OF RENTAL VARIATIONS IN COMMERCIAL PROPERTIES IN WUSE 1 AND WUSE II ABUJA
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of study
Commercial properties in form of housing or real estate has long been perceived by the general public as a form of basic necessity and often represents the one single largest investment in real estate investment portfolio. Toivonen and Viitanen (2016) underlined that commercial property market is closely linked to the surrounding society as commercial buildings have several economic, environmental, political, social and cultural influences. Toivonen and Viitanen (2015) also analysed the forces of shaping of future commercial property market. Many important indicators, such as demand, supply, vacancy rates, absorption volume, proposed projects, as well as economic indicators and legal and tax matters are being included in the regular property market overviews.
According to Boon and Higgins (2017), rental value is a key parameter for measuring real property performance. It is also a major cost for tenants and an important source of income for the real estate investors. Key property market participants such as investors and developers often use rental value as an indicator to appraise the viability of their real estate development and investment schemes. On this basis, understanding the nature and variation in rental value of commercial property provides a better comprehension of the dynamics of the commercial property market. Also, rental growth indices are often incorporated into discounted cash flow analysis for the appraisal of real property investments (Boon and Higgins, 2017).
Rural – urban migration and rapid growth in population have led to higher level of urbanization in Nigeria cities which have resulted to high demand for the existing limited supply of commercial property consequent rent for such properties increased considerably. This trend has continued with the effect that “the average worker is paying 30% to 40% of his salary as rent” (Oshadiya, 2005). Thus the increase in rents on the properties has led to the variation of rent on properties. Thus, professionals in the real estate industry in Nigeria require better knowledge of commercial property rental dynamics as well as the key factors that influence changes in commercial property rents in Abuja. It is against this background that this study seeks to assess the rental variation in commercial properties in Wuse I and Wuse 2 Abuja
1.2 Statement of research problem
Problems of real estate investment especially commercial properties in urban centres has often been viewed in terms of quantitative deficiency and qualitative inadequacy with little or no attention to the problems of increasing rent. As there are many business outfits struggling to get accommodation in terms of offices, shops warehouse etc, most of those that already have a roof over their heads in rented accommodation, especially the majority low income urbanities are not comfortable because of sprawling rent increases. The problem of variation in rental value of residential property reached a peak during the crisis stage in the early 1970s which led the then Federal Military Government to set up a Rent Panel to review, among other things, the level structure of rents in urban centers. Today, the rent situation has not improved rather it has been further worsened by the equally sprawling inflation which has tremendously shot up the cost of building materials. The purpose of this study is, therefore, to carry out an assessment of rental variations in commercial properties in Wuse zone I and Wuse II Abuja.
1.3 AIM AND OBJECTIVES OF THE STUDY
The aim of this research is to assess rental variations in commercial properties in Wuse zone I and Wuse II Abuja.
The specific objectives of the study are:
- To identify the types of commercial properties prevalent in Wuse zone I and Wuse II.
- To assess rent passing on commercial properties in the study area
- To examine the factors affecting rental values of commercial property in the study area
- To examine the causes of rental value variation Wuse zone I and Wuse II Abuja.
1.4 Research questions
The following research shall guide the researcher to achieve the aim and objectives of this study:
- What are the types of commercial properties prevalent in Wuse zone I and Wuse II Abuja?
- What is the rent passing on commercial properties in the study area
- What are the factors affecting rental value of commercial properties in the study area?
- What are the causes of rental value variation in Wuse zone I and Wuse II Abuja?
1.5 Significance of the study
The finding of this study will be of benefit to the following groups;
Firstly, tenants who are charged rents based on different reasons, especially when the properties are of the same nature (physically). This will again enable the investors not only to understand how occupier thinks, but also why and the things they consider before acquiring properties for certain uses.
Secondly, the generality of the public can now understand the reason why the rents being commanded by commercial properties have to differ and changes over the years. Lastly, this research work will help to determine the factors influencing commercial properties which are an essential pre-requisite to successful development as well as stimulating interest in the students to carryout out further research on the topic.
1.6 Scope and limitations of the study
The study is analyze the variation in the rental value of commercial properties in Wuse zone I and Wuse II Abuja. The scope of this study will be limited to a period of five years (2015 to 2020) and it is restricted to commercial properties such as shops, warehouse and offices available in Wuse zone I and Wuse II Abuja.
Limitation
Expectedly, this work met with some hindrances during the stage of data collection. The issue of rent passing on a property (commercial) is usually regarded as classified information, which is not easily disclosed to people particularly researchers. This was largely suspected to be the reason why some Estate surveyors, property owners, tenants, Estate firms, property companies and even Estate agents who were approached through oral interviews, discussions and visitations found it rather difficult to reveal essential information despite every explanation that the exercise is strictly for academic purposes, a good number of them, still nursed the fear that it may be for property rating and taxation purposes.
There was also the problem of logistics occasioned by the society. The researcher worked with a very light budget throughout the period of study as the frequent and repeated visits to relevant persons and offices entailed quite some money. Moreover, also recall that some of the interview respondents were not co-operative as they kept on playing to the gallery as a means of avoiding supplying the required information. On a general note however, the researcher ensured that these bottle – necks never affected the findings of this study since the success far outweighed the hindrances as enumerated.
- Operational definition of terms
Rent: The universal dictionary of the English language (2016) defined rent as the regular payment made for the use of land or buildings that belongs to someone else. The Economist defined rent as “the revenue from land resources that is equal to the value of its marginal services rendered in a productive process” (Richfield, 2011).
Land: Section 205 of the property act of 1925 defined land to include land of any tenure and mines and minerals wealth or not held apart from the surface and building or part of the building, and other corporeal hereditament, benefit right or privileges in or derived from land.
Property: Property in a technical legal term means “a unit or object whether tangible or intangible upon which interest is created and over which control or right of ownership is exercised by the owner of interest.
Landed Property: Landed property or landed estate is a property that generates income for the owner without the owner having to do the actual work of the estate.
Rental Value: Is the maximum amount which a property will let in the open market at any giving time.
Real Estate: Is a legal concept encompassing all the interests, right and benefit related to ownership. Properties consist of the right of ownership which entitle the owner to a specific interest or interest in what is a physical entity and its ownership Olusegun (2003).
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