Investment performance indicators of selected Lagos commercial properties

Pages83-97
Published date01 February 2016
Date01 February 2016
DOIhttps://doi.org/10.1108/JPIF-05-2015-0030
AuthorSolomon Aondohemba Anule,Obinna Lawrence Umeh
Subject MatterProperty management & built environment,Real estate & property,Property valuation & finance
Investment performance
indicators of selected Lagos
commercial properties
Solomon Aondohemba Anule and Obinna Lawrence Umeh
Department of Estate Management, University of Lagos, Lagos, Nigeria
Abstract
Purpose The purpose of this paper is to identify drivers of investment performance of commercial
property in Lagos with a view to preventing a rule of thumb approach to investmentsdecisions.
Design/methodology/approach Questions theoretically underpinned on factors influencing
commercial property investment performance were designed and administered to 125 real estate
practitioners in Lagos in order to weigh the factors influencing commercial property investment
performance in five selected locations in Lagos. The responses were analyzed using the mean item
score and the principal component analysis, and the most critical factors extracted.
Findings Individual sub-markets reveal top factors common to each location as cost of building
materials, location, quality of road infrastructure, rental growth and security. Findings across sub-
markets reveal three critical set of factors. Condition of the premises; the second theme is a mixture of
socio-cultural and legal framework; the third is also a mixture of socio-cultural, political and economic
factors. Their factor loadings are: 0.851, 0.828 and 0.805, respectively.
Practical implications Investors, appraisers and property managers may benefit from the
findings as they make better investment and management decisions. Also adopting modern
construction methods will cut unnecessary cost incurred from wastage of building materials and open
the door to private investors with limited capital.
Originality/value This paper is the first to capture five different locations in Lagos. It goes beyond
the study of Thontteh and Omirin (2014) which covered only one location. Thus, this study tends to
present more reliable findings.
Keywords Performance, Property, Investment, Indicators, Commercial, Lagos
Paper type Research paper
1. Introduction
Investment is the giving up of a capital sum now in exchange for benefit to be received
in the future which usually take the form of an income flow and or capital gain (Enever
and Isaac, 2002). Property investment performance evaluation has evolved as a
business philosophy to determine the profitability and or advantages an investment
has over another (Thontteh and Omirin, 2014). Property investment can be direct or
indirect. In direct property investments, funds are invested directly by the investor(s) in
physical real estate; while in indirect investment, it is through managed funds, such as
real estate investment trusts (REITs), real estate exchange traded funds, commingled
real estate funds, infrastructure funds and among others (Woychuck, 2012). Real estate
distinguishes itself as an investment object from other asset classes with respect to
payoff and risk as real estate offers an investment alternative that lies in between the
risk and payoff characteristics of more volatile and potentially high-yielding stocks
and less-volatile and lower yielding bonds (Geltner et al., 2007). Real estate investment
like other investments is also affected by several factors which may be economic or
non-economic as evidenced by Pettinger (2011), Lieser and Groh (2011), Chandra (2010)
and Nguyen (2011). While developed economies around the world have been able to
identify specifically these factors, little seems to be known of developing economies
Journal of Property Investment &
Finance
Vol. 34 No. 1, 2016
pp. 83-97
©Emerald Group Publis hing Limited
1463-578X
DOI 10.1108/JPIF-05-2015-0030
Received 10 May 2015
Revised 5 July 2015
Accepted 4 August 2015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
83
Investment
performance
indicators

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