Investment performance indicators of selected Lagos commercial properties

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 investments’ decisions.

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 loading’s 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.

Citation

Anule, S.A. and Umeh, O.L. (2016), "Investment performance indicators of selected Lagos commercial properties", Journal of Property Investment & Finance, Vol. 34 No. 1, pp. 83-97. https://doi.org/10.1108/JPIF-05-2015-0030