Performance of Commercial Property and Location Attribute on Real Estate Investment Viability in Bauchi Metropolis

Cite this article as: Omachoko I. F., Bello M. U. & Ufere J. k. (2025). Performance of Commercial Property and Location Attribute on Real Estate Investment Viability in Bauchi Metropolis. Zamfara International Journal of Humanities,3(2), 46-52.www.doi.org/10.36349/zamijoh.2025.v03i02.005

PERFORMANCE OF COMMERCIAL PROPERTY AND LOCATION ATTRIBUTE ON REAL ESTATE INVESTMENT VIABILITY IN BAUCHI METROPOLIS

Igoche Frederick Omachoko1
Dr. M. U. Bello2
Dr.  J. k. Ufere2

1Department of Estate Management and Valuation, Federal Polytechnic, Bauchi.
2Department of Estate Management and Valuation, Abubakar Tafawa Balewa University, Bauchi

Abstract: This paper examines the performance of commercial property in relation to location attribute on real estate investment viability in Bauchi metropolis with the aim of determining the performance of commercial property in relation to location attribute on real estate investment viability in Bauchi metropolis. The performance commercial property investment is very important at this time when emphasis is on investment performance analysis in many parts of the world. This is even more important in Nigeria where only few studies have been carried out on the level of performance achieved by property investments. Moreover the impact of the ongoing changes in the global and local economy on the performance of real estate investment is serving to highlight the need for its careful consideration in the investment decision making process. quantitative research approach and descriptive statistics were used to analyzed the comprehensive data collected from Estate Surveyors and Valuers who are in the business of managing commercial property within Bauchi metropolis.

Keywords: Performance, Commercial Property, Location Attribute, Investment, Viability.

Introduction

In recent years the demand for commercial property has tremendously increase due to factors like population growth, the need for financial independence, affluence in society, change of life style or quality of life for some (Chua, Chiu, & Bool, 2019). Commercial property is what gives a city much of its life and character. It includes shopping centers and strip malls, medical buildings, educational buildings, hotels and offices. Apartment buildings are often considered commercial, even though they are used as residences, because they can be owned to produce income (Sennett, 2018). Commercial properties offers predictable cash flow; it appreciates in value, thus keeping up with inflation; it provides a higher return because of positive leverage; and it offers equity growth through debt reduction and it can be held as investment goods and as consumption (i.e. owner-occupier) (Baum, Crosby, & Devaney, 2021).Specially, in the real estate market, commercial property is one of the main activities which have a high demand from people (Nanda, Xu, & Zhang, 2021). Thus, deciding prices for its value is critically important.

Location objectives can be multifarious like having a potential for adequate sales, i.e. more profit, or eradicating the cost of building a shop, or reducing the gains of prospective competitors, and improving the prospects of gaining more customers from a neighboring business. You can acquire real estate by purchase or lease. Whether, it is leased or purchased, site selection is critical to the success of a business.Due to the rising costs of land, building and construction, and associated interest rates, the significance of avoiding poor or mediocre locations has heightened (Mesquita, 2016).

When a commercial property is to be let or purchased, it cannot be considered as a separate unit. A bundle of inherent attributes such as location, structural, or neighborhood of the housing unit play a vital role, directly affecting the rental value is implicitly combined with many qualities of the surroundings. As suggested by Won, & Lee, (2018), the rental values of commercial properties are influenced by various building characteristics which are related to neighborhood, location and dwelling characteristics. However, in recent years, the increasing rate of variations in rental values of commercial properties among varying neighborhoods in many Nigerian towns and cities has continued to dominate discussions among practicing estate surveyors and valuers, property owners, investors, users, estate brokers, and policy makers on housing investment and management. Careful study has revealed that investors chooses an investment that attract patronage and at the same time yields returns on investment. Which in turn arouse a need for location that has comparative economic advantage over other landuse. (Okeke, 2009).

LITERATURE REVIEW

Commercial Real Estate Investments Commercial real estate constitutes a large p art of a nation’s wealth and plays a vital role in shaping the urban space (Slade, 2000). Kalu (2001) opines that the need for property portfolio performance measurement arises due to four important reasons namely, communication, actual performance against goals, accountability and basis for future action. Kalu (2001) however classified investment into shares, bank deposits, stock & bonds and property.

Ogbuefi (2002) classified investment into financial assets and non-financial assets. According to him, financial assets are made up of (a) direct ownership (equity) securities (such as common and preferred stocks (b) indirect ownership securities (shares of close-ended and open ended investment companies) (c) Monetary claims (such as government bonds, corporate bonds and savings / fixed deposit accounts) and (d) contingent claims (such as warrantees, options and convertibles). However, Non financial assets include (a) real estate (in the form of residential, commercial, industrial, recreational agricultural, etc) (b) collectibles (such as art, antiques, coins and stamps) and (c) precious metals and stones.

Commercial Real Estate Investments Udechukwu (2009) pointed out that commercial properties include the various types of income producing properties that are basically used for trading (buying & selling). Olusegun (2011) classified these into stalls, shops, purpose built shopping mall, supermarkets, banking halls, offices and warehouses. Also included are chain stores, departmental stores, mobile shops, etc.

Commercial Real Estate Investments Udechukwu (2009) pointed out that commercial properties include the various types of income producing properties that are basically used for trading (buying & selling). Olusegun (2011) classified these into stalls, shops, purpose built shopping mall, supermarkets, banking halls, offices and warehouses. Also included are chain stores, departmental stores, mobile shops, etc.  It refers to buildings housing businesses, office duties and warehouses, and the like. Commercial activities date as far back as human civilization. As people continue to trade, the need for space for such transactions remains important. The complexities of human taste, requirements, and nature of businesses most certainly lead to the need for different types of commercial properties (Ibrahimly & Alipour, 2017).

Millington (1982) cited in Ogunleye (2015) identified these interests and types of property as freeholds, short or long term leaseholds, ground rents, offices, shops, factories, warehouses and each of these interests or rights or types of property will have different features which make them more or less attractive to investors depending upon the circumstance and the requirements of the particular interest. Property is thus seen as subject of ownership which concerns the right of individuals, persons, sovereign power and the exercise of such rights of ownership, use and the nature of such rights are subject to influence human activities (Ogunleye, 2015).

Analyzing the performance of real estate investments is not new to Nigeria. Udoekanem, Ighalo and Nuhu (2014), Udoekanem, et al. (2015), Oyewole (2013), Odu (2011), Dabara  (2014), Umehand Oluwasore (2015), Umeh, Anule and Otegbulu (2016), among other studies, have assessed, analysed and compared the performance of different types and classes of real estate investment using different objectives and assessment metrics. S and Udoekanem et al. (2015), analyse the performance of commercial real estate investments in Minna and Wuse respectively for their association with macroeconomic factors. Oyewole (2013) compares residential and commercial real estate investments in Ilorin to determine which of the investments present a better investment option in terms of performance. Odu (2011), Umeh and Adilieme (2019a), Dabara (2014) and Umeh and Oluwasore (2015) analyse the performance of real estate investments in Lagos, Akure and Ibadan in terms of their inflation hedging abilities. Additionally, Umeh, Otegbulu and Anule (2016), Umeh and Adilieme (2019b) assessed the potential benefits due to diversification of commercial real estate investments in selected locations in Lagos.

Performance Evaluation of Real Estate

Udoetuk (2008) and Kalu (2001) asserted that real estate, unlike other types of investment is unique in nature and location; real estate may not be regularly revalued and if the property has not been tested in the market, there will be no specific evidence in terms of rental value, yields, capital value, etcetera. The figures so obtained are usually based on historic cost data from which comparable evidence can be drawn. Based on the unique nature of real estate, it is difficult to assess future trends from historic data and estimate changes in the real estate investment market.

Olaleye, Adegoke and Oyewole (2009) examined the characteristics of direct property and listed Property Company in comparison with other securities in the Nigerian Stock Exchange over the period of 2001 to 2007. The study evaluated the capital return and diversification potential of the investment media through the use of mean return, standard deviation, correlation and Sharp market index model. The results showed that while various investment options in real estate and stock market offered attractive returns, real estate investment outperformed stocks and offered diversification benefits for investors of a mixed assets portfolio. In the view of Udoetuk (2008), the evaluation of property performance is difficult as it is based on the changes in the capital value of the investment flow and the income generated by the investment.

Locational Attributes of Commercial Properties

Nwanekezie (2018) opined that commercial property investment markets occupy a prime place in the property market because it has good number of property investment either as direct or indirect into real estate. The best commercial property investments are those located in central positions where the value can be said to reside in the site and not in the building itself. Commercial properties have been regarded as very secure investment with capital appreciation and few management difficulties. One of the major determinants of commercial real estate is location. Shops vary in size and type from the out of town supermarket through the good shopping centers. Other factors that determine the rental value of shops are the area of the frontage, layout for display of goods, condition of the property, sanitary arrangement and access to rear for delivery (Nwanekezie, 2018). 

Udoetuk (2008) opines however that a careful analysis of the past can equip an investor with an idea of the future returns from an investment, the type of property to invest in and in what location to invest in.There is no question that proper site selection is critical in most ventures providing a consumer service or product (Eckert, He, & West, 2015). In the extremely competitive retail environment, even slight differences in location can have a significant impact on the market share and profitability. Most importantly, since store location is a long-term fixed investment, the disadvantages of a poor location are difficult to overcome (EL Samen & Hiyasat, 2017). Basic to the success or failure of any retail firm are decisions about location.  An outlet can have quality offerings, excellent personnel, and competitive prices but fail because it is not conveniently located. Store location has a major influence on a store’s success (Dong, 2013; Z. He, Cheng, Dong, & Wang, 2016). As cities like Bauchi grows and becomes urbanized also, the industry grows and matures, and as competition continues to intensify, competition for prime sites also intensifies. Property investors are forced to find better and more innovative methods of locating and evaluating sites. A key challenge facing every investor today is how to quickly identify the factors that determine a successful business location (Melanda, Hunter, & Barry, 2016; North & Miller, 2017;ELSamen & Hiyasat, 2017).

METHODOLOGY

In this study, quantitative research approaches were used. A questionnaire was sent to the respondents to fill out and return. The population of the study were Estate Surveyors and Valuers who are in the business of property management within Bauchi metropolis. The Estate Surveyors & Valuers which are mostly found working in private Estate Surveyors and Valuers Firms and non estate surveyors and valuers property managers within the study period (2014 - 2023). The sample frame of the Estate Surveying and Valuers was secured from the most recent record of the Bauchi State branch of the Nigerian Institution of Estate Surveyors and Valuers to be 35. The sample size of this study was the total sample frame (Total Enumeration Survey) for estate surveying and valuation firm given that the sample frame was not large. Descriptive statistics was used to analyzed the comprehensive data collected. 

RESULTS AND DISCUSSIONS

Table1: Descriptive statistics of performance of commercial property in relation to location attributes

S/N	STATEMENT	VL	L	NH/L	H	VH	TOTAL
1	Access to high way	4(11.4%)	10(28.6%)	6(17.1%)	5(14.3%)	10(28.6%)	35(100%)
2	Access to bye way	4(11.4%)	10(28.6%)	6(17.1%)	5(14.3%)	10(28.6%)	35(100%)
3	Closeness to bus stop	0	1(2.9%)	5(14.3%)	6(17.1%)	23(65.7%)	35(100%)
4	Closeness of property to city centre	0	0	2(5.7%)	7(20%)	26(74.3%)	35(100%)
5	Closeness of the property to market	5(14.3%)	6(17.1%)	4(11.4%)	4(11.4%)	16(45.7%)	35(100%)
6	Closeness of the property to motor park	8(22.9%)	4(11.4%)	11(31.4%)	8(22.9%)	4(11.4%)	35(100%)
7	Closeness of the property to children school	1(2.9%)	14(40%)	14(40%)	5(14.3%)	1(2.9%)	35(100%)
8	Closeness of the property to worship centre	20(57.1%)	5(14.3%)	6(17.1%)	1(2.9%)	3(8.6%)	35(100%)
9	Closeness of the property to hospital	2(5.7%)	7(20%)	18(51.4%)	6(17.1%)	2(5.7%)	35(100%)
10	Closeness of the property to an event centre	18(51.4%)	3(8.6%)	10(28.6%)	2(5.7%)	2(5.7%)	35(100%)
11	Closeness of the property to security outfit	1(2.9%)	15(42.9%)	9(25.7%)	9(25.7%)	1(2.9%)	35(100%)

Source: field work and SPSS 24

Key: VL=Very Low, L= Low, NH/L= Neither high nor low, H= High, VH= Very high

The analysis of the rate of performance of commercial properties in relation to their location attributes on real estate investment viability in Bauchi metropolis provides insights into how different location factors influence property performance.

For access to highways, the responses were fairly distributed, with 28.6% of respondents rating it as very high, 28.6% as low, 17.1% as neither high nor low, and 14.3% as high. This indicates a divided opinion on the importance of highway access, with a slight leaning towards higher ratings.

Similarly, access to byways showed the same distribution, indicating that byways are valued similarly to highways.

Closeness to bus stops was highly valued, with 65.7% of respondents rating it as very high, 17.1% as high, and 14.3% as neither high nor low. Only 2.9% rated it as low. This suggests that proximity to bus stops is a crucial factor for the performance of commercial properties.

Closeness to the city center is rated very high by 74.3% of respondents and high by 20%. Only 5.7% rated it as neither high nor low, with no respondents rating it as low or very low. This underscores the significant impact of being near the city center on property performance.

Closeness to markets had a mixed response, with 45.7% rating it as very high, 17.1% as low, 14.3% as very low, 11.4% as high, and 11.4% as neither high nor low. This indicates that while proximity to markets is important, it is not universally seen as critical.

Closeness to motor parks showed a diverse range of opinions, with 31.4% rating it as neither high nor low, 22.9% as very low, 22.9% as high, 11.4% as low, and 11.4% as very high. This suggests a varied impact on property performance depending on the specific context of the motor park's location.

Closeness to children's schools was predominantly rated as low or neither high nor low, both at 40%, with very low and high ratings at 2.9% and 14.3% respectively. This suggests that proximity to schools is generally not a major factor for commercial property performance.

Closeness to worship centers was largely rated very low at 57.1%, with low and neither high nor low both at 14.3%, high at 2.9%, and very high at 8.6%. This indicates that proximity to worship centers is generally seen as a less significant factor.

Closeness to hospitals showed a balanced distribution, with 51.4% rating it as neither high nor low, 20% as low, 17.1% as high, and 5.7% as very low and very high. This suggests a moderate importance of hospital proximity.

Closeness to event centers was rated very low by 51.4% and low by 8.6%, with 28.6% rating it as neither high nor low, and only 5.7% rating it as high and very high. This indicates that proximity to event centers is generally not a significant factor.

Closeness to security outfits showed a balanced view, with 42.9% rating it as low, 25.7% as neither high nor low, 25.7% as high, and 2.9% as very low and very high. This suggests a moderate importance of security outfit proximity on property performance.

Overall, the results indicate that proximity to bus stops and the city center are the most highly valued location attributes, significantly impacting the performance and investment viability of commercial properties in Bauchi metropolis. Other factors such as proximity to highways, byways, markets, and motor parks show varied importance, while proximity to schools, worship centers, event centers, hospitals, and security outfits are generally seen as less critical.In summary, proximity to highways, byways, bus stops, the city center, markets, and hospitals are the most highly valued location attributes, significantly impacting real estate investment decisions in Bauchi metropolis. Other factors such as proximity to motor parks, schools, security outfits, worship centers, and event centers are viewed with varying degrees of importance, reflecting the diverse considerations of property investors in the area. The result of this study agrees with that of Misbahu, Mohammed, Maryamu, Sakariyau and Steve (2023) who found that locational and road network factors are incorporated into the regression model, explaining approximately 36.6% of the variance in residential property values. These characteristics significantly influence rental value fluctuations, as evidenced by positive R-square and F-statistics values, affirming the model's reliability. Similarly, Studies by Ankeli et al., (2016) and Jimoh & Ige, (2017) have shown that properties situated in proximity to transportation nodes often command higher values. Also, studies such as those conducted by Onyejiaka and Okpala (2020) in Lagos and Ogbonna and Onyejiaka (2023) in Owerri have shed light on how transportation improvements influence property values. The study also aligns with the study of Ibrahim et al., (2024) who examined the locational attributes affecting residential property value with special reference to Birnin Kebbi town in which various locational attributes that include proximity to CBD, proximity to workplace, Transportation, proximity to Market, Infrastructural provisions, Proximity to Nuisance and Population have been identified and their impacts as it directly or indirectly affects residential property values in the areas understudied.

Conclusion

The study concludes that the commercial property market in Bauchi metropolis is robust, with offices and retail shops constituting the majority of the investments. Locational attributes, such as accessibility to essential amenities and the area's commercial significance, play a crucial role in determining rental values and investment viability. Experienced property managers, estate surveyors, and valuers are integral to maintaining and enhancing the performance of these commercial properties. Thus, investment in well-located properties with good amenities is likely to yield favorable returns.

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