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The market value of any property investment will tend to deteriorate over time when compared to similar modern properties if monies are not periodically expended to mitigate the effects of obsolescence. This paper examines the relationship between the initial yield of a property at purchase and the rate of future rental value growth necessary to achieve a criterion rate of return on the investment. Traditionally in calculations of the future rental growth rate required to justify an initial investment yield (when compared, say, to the rental shown by gilt‐edged stocks) the simplistic view is taken that following purchase no further expenditure is anticipated. However, if a property is to maintain its original market appeal (or adapt to evolving circumstances), capital must from time‐to‐time be injected for the purposes of refurbishment. Thus, any analytical model which ignores this inevitable expenditure, but nevertheless assumes a constant rate of long‐term future rental growth, is quite unrealistic. A Refurbishment‐Rental Growth Model is derived which allows the introduction of regular future capital expenditure both in terms of magnitude and frequency. Various examples are illustrated of the effect which such expenditure may have in necessarily increasing the required future rental growth for a property investment in order to achieve an anticipated level of return.

In the 1970s, yields on UK commercial investment property appear to have been influenced principally by the cost of long term capital and the rate of rental growth. Consequently, yields tended to respond to the economic cycle, falling in times of economic recovery and rising when the economy moved into recession. However, in the 1980s so far, yield trends appear anomalous by comparison. Yields failed to rise on the advent of the recession in 1980–81, despite a sharp rise in the cost of capital, yet rose in 1982 just when the economy began to emerge from recession, and have since continued to rise as economic recovery and rental growth have gathered pace. This paper seeks to explain recent movements in investment property yields and to reconcile these with trends in the 1970s. It concludes that the behaviour of yields in the 1980s can be explained by the dominance of institutional investors in the property market, and by their perception of the changing risk attributes of property (compared with alternative investments) which have resulted from changes taking place in the investment markets and the UK economy.

This study aims to review the approaches used in the analysis of rental income of residential property in Abuja, Nigeria, to strengthen the existing investment performance approaches initially relied upon by property investors towards having a better and reliable performance evaluation for property investment decision-making.

With the adoption of combined methodological approaches, quantitative data on rental history (2006–2016) were collected on the randomly selected residential investment properties (block of flats) available in the portfolio of estate surveying firms in the different locations/sub-markets of the study area. Data collected were analysed with the frequency mean and growth rate.

All the methodological approaches adopted for analysis displayed varying performance results. No particular sub-market maintains the same ranking position in any of the approaches. The developmental phases previously used as an indication of yield in the study area do not correspond with the status of rental income of sub-markets. Yield has been observed to be a mere attraction to property investment; it does not translate to income growth. Mean income (though a good indicator of changes in rental income) is not a reliable indicator of growth in income, and growth in the rate of income omitted the changes in rental income during the holding period.

The study was restricted to historical rental income data on a block of flat-type residential property, and it does not include capital value analysis or inquire into the factors responsible for variation in rental income during the study period. The outcome of this study is only applicable to a block of 4 number three-bedroom flats residential property type.

Multiple simple methods of analysing rental income performance should be preferred to the single complex method. This will simplify investors’ rental income characteristics of investment towards a better understanding of rental property investment analysis. That rental value appreciates with time does not translate to an increase in the actual rental income of residential investment property.

Through these performance approaches, ranking of the sampled properties in the study area sub-markets will enhance investors’ traditional diversification planning across the study area for an enhanced combination that can achieve latent profitability. The attention of investors is hereby called to these multiple approaches to enable them to merge their investment objectives with any or a combination of these approaches towards making rational investment decisions.

This seems to be the first advocacy for methodological paradigm shift applicable to direct residential property investment performance in Nigeria, using transaction rather than appraisal data.

The paper addresses the practical problems which emerge when attempting to apply longitudinal approaches to the assessment of property depreciation using valuation‐based data. These problems relate to inconsistent valuation regimes and the difficulties in finding appropriate benchmarks.

The paper adopts a case study of seven major office locations around Europe and attempts to determine ten‐year rental value depreciation rates based on a longitudinal approach using IPD, CBRE and BNP Paribas datasets.

The depreciation rates range from a 5 per cent PA depreciation rate in Frankfurt to a 2 per cent appreciation rate in Stockholm. The results are discussed in the context of the difficulties in applying this method with inconsistent data.

The paper has methodological implications for measuring property investment depreciation and provides an example of the problems in adopting theoretically sound approaches with inconsistent information.

Valuations play an important role in performance measurement and cross border investment decision making and, therefore, knowledge of inconsistency of valuation practice aids decision making and informs any application of valuation‐based data in the attainment of depreciation rates.

The paper provides new insights into the use of property market valuation data in a cross‐border context, insights that previously had been anecdotal and unproven in nature.

The retention rate of a company has an impact on its earnings and dividend growth. Corporate management has control over this. However, lease structures in some real estate markets reduce the control of investment managers and force them to adopt full distribution policies and a passive management style. This is likely to impact the rental performance of the real estate by permitting depreciation to go uncorrected. This paper examines several European office markets across which lease structures and retention rates vary. It then compares depreciation rates across these markets. It is concluded that there is evidence of a relationship between retention and depreciation. Markets with particularly inflexible lease structures clearly exhibit low retention rates, and we can tentatively suggest higher levels of rental value depreciation. This poses interesting questions concerning the relationships between lease structures in different markets and their impact on expenditure by owners, and also concerning the impact on building depreciation and property performance. While longer and deeper datasets are necessary to establish direct linkages between lease structures and performance, this paper raises important issues for global investors.

The mathematics of property valuations commonly used in practice exist in several formulations which have been adopted over the years. All are similar in that they represent simple discounted cash flow models equating the estimated future earnings capacity of a property to a net present (capital) value. The process, whilst appearing somewhat daunting, is in fact accomplished in a manner such that, under normal circumstances, the estimated future cash flow beyond the next rent review is not explicitly expressed. Instead of generating a future income flow (assuming some rate of rental growth) and discounting at a money rate of interest (suitably adjusted for risk), the estimated rental income at the next review is capitalised at a relatively low investment yield rate which merely implies a future rental growth rate.

This study evaluated the effect of macroeconomic factors on residential real estate (RE) investment returns in the cities of Abuja and Lagos, Nigeria, with a view to guiding RE investors and researchers.

A survey research design was employed using a questionnaire to collect RE transaction data from 2008 to 2022 from estate surveying and valuation firms in the study areas. Rental and capital value data collected were used to construct rental and capital value indices and total returns on investment. The macroeconomic data used were retrieved from the archives of the Central Bank of Nigeria (CBN). Granger causality (GC) and multiple regression models were adopted to evaluate the effect of selected macroeconomic variables on residential RE investment returns in the study areas.

The study found a progressive upward movement in rental and capital values of residential RE investment in the study areas within the study period. Total and risk-adjusted returns on investment were equally positive within the study period. Only the inflation rate, unemployment rate and real gross domestic product (GDP) per capita were found to be the major determinants of residential RE investment returns in the study areas within the study period.

The secrecy associated with property transaction information/data by RE practitioners in the study areas posed a challenge. Property transaction data were not adequately kept in a way for easier access and retrieval in many of the estate firms and agent offices. Consequently, there was a lack of data that spanned the study period in some of the sampled estate firms or agent offices. This data collection challenge was, however, overcome by the excess time spent retrieving the required data for this study to ensure that the findings appropriately answer the research questions.

Inflation and GDP per capita have been found to be significant factors that influence residential RE investment performance in the study areas. Therefore, investors should pay attention to these identified macroeconomic factors for residential RE investment in the study areas whilst making investment decisions in order to mitigate a possible loss of income or return. The government should formulate and implement economic policies that would address the current high unemployment and inflation rates in Nigeria at large.

This study has extended and further enriched the existing body of knowledge in the field of RE investment analysis in Nigeria. To the best of the authors' knowledge, this study is the first to adopt the Cornish Fisher value-at-risk and modified Sharpe ratio models to analyse risk and risk-adjusted returns on residential RE investment, respectively, in Nigeria. It has therefore redirected the focus of RE researchers and practitioners to a more objective approach to RE investment performance analysis in Nigeria.

The quantitative assessment of the degree of risk associated with the direct acquisition of commercial property for investment purposes is practically non‐existent. There is almost always a total reliance on unquantified subjective feeling with no attempt to transform such a qualitative treatment into an analytically more acceptable and useful form. Whilst the investment capitalisation rate should, to an extent, reflect the investor's view of the future earnings capacity of a particular property, this yield rate is principally a function of general market sentiment and may not significantly allow for the inherent risk characteristics of an individual investment. This is especially the case at the prime end of the market where the pressure of funds competing to invest in a sector of particularly limited supply remains most severe.

Looks at the philosophy of valuation, explaining the distinction between “worth” and “price”. Attempts to explain traditional techniques of assessing price. Looks at the development of discounted cash flow and its applications in valuations and calculations of worth. Concludes that there must be more openness with clients about valuation risks and issues so that they can make informed judgements.

This paper analyses the choice of the optimal lease term of office property in relation to expected lag vacancy, periods of rent‐free and expected rental income growth. The optimal lease term is the one that minimizes the expected costs of contract negotiation from the perspective of landlords. Specifically, it presents an analysis of how to estimate effective rents based on the lease term, expected lag vacancy and rent‐free periods. This study shows that the optimal lease term tends to increase under the following conditions: when the expected rate of rental growth decreases, the discount rate increases, or the expected lag vacancy increases. A longer contract duration is less costly when future rentals are discounted at a higher rate. Altering the lease length will change the risks taken by the landlord. Thus, contract length can be used as a device for insuring vacancy risk. Moreover, we find that the optimal lease length is more sensitive to the lag vacancy when the discount rate is at a relatively high level.