CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The study of rental variation of real estate investment, whether residential or commercial, 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 rental variation in residential and commercial property achieved by property investment. Moreover the impact of the ongoing changes in the global and local economy on the value of real estate investment is serving to highlight the need for its careful consideration in the investment decision making process (Palmquist, 1980). Since 1990s, the demand for commercial outlets has risen astronomically in most urban centers in the country. This is as a result of the economic recession which compelled the unemployed and public servants to explore trading activities in addition to their normal jobs. The investors’ reaction to this development has been to increase the number of commercial outlets at the expense of residential property developments. Therefore in many towns and cities of Nigeria, open spaces within the vicinity of public institutions have been irrationally developed to accommodate shops and other retail outlets. The situation is further compounded with the perceived notion among Nigerian property investors that commercial property performs better than residential property investment (Smith, 1986). However, the investors can no longer base their decision on intuitive grasp of the market which Ajayiand Fabiyi (1984) considered inadequate for success in property ventures. The central theme of this study therefore is to examine the rental variation of residential and commercial property investments in the study area. This will provide for better investment decision and risk management for real estate investors in Nigeria.