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A COMPARATIVE ANALYSIS OF RENTAL VARIATION IN RESIDENTIAL AND COMMERCIAL PROPERTIES IN NIGERIA (A CASE STUDY OF PORT HARCOURT 2004- 2014)

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Shelter is a basic necessity in life. An individual can satisfy this need by either occupying his own (owner’s occupier) property or renting another persons property. In our traditional society, the need for shelter is mainly met through the first alternative, that is owner occupation. With the emergency of urban centres, the situation has changed. Many people are no longer about to own property because of the difficulty in the acquisition of land and the high cost of building construction. Therefore, they are left with the alternative of renting other people’s properties in order to satisfy their need for shelter. Consequently two classes of urban resident have emerged, the landlord and the tenant under this arrangement the tenant pays to the landlord a certain amount of money in consideration for his use of the landlord’s house. 

This amount is popularly known as rent. During the civil war the Nigeria that is 1966 to 1970 many landed properties in the urban areas of the former Eastern Region of Nigeria, including Port-Harcourt , were destroyed. Consequently, there was a sharp decline in the supply of landed properties after the war. Furthermore, the post  civil war period witnessed an unprecedented number of the rural population trooping into the urban centres due to the conspicuous prosperity brought about in the urban area by the oil boom. This resulted to high demand for the existing limited supply of landed properties. 

Consequent upon these, rent for landed properties increased considerably. This trend has continued with the effect that “the average worker is paying between 30% to 40% of his salary as rent ” (Oshadiya, 1985). Thus the increase in rents on the properties has led to the variation of rent on properties. In urban area due to location advantage (for example prime location) which some properties offer above others for commercial and residential uses, rent tend to very on account of the type of use which a property can offer.

1.2   STATEMENT OF PROBLEM

Location of economic properties has been a difficult concept to understand. Although the primary objective of commercial properties is the derivation of financial gains, while that of residential properties is for habitation, shelter and comfort, the demand for land is a refection of the profitability or utility derivable from it use. The greater the benefit to be obtained from a particular use, the higher the rent that the user will be willing to pay for it. There appear to be wide ranging differences in the levels of rent passing on residential and commercial properties in Port-Harcourt  and Nigeria generally. This research is seeking among other things to find out the causes of rental variation in commercial and residential properties in Nigeria, Ogui New Layout as a case study.

1.3  PURPOSE OF THE STUDY

The main purpose of this research is to examine the reasons for rental variation in commercial and residential properties with a view to provide tool to be used in catching issues related to rent on these properties in Port-Harcourt  and Nigeria generally. In order to achieve the standard goals, the following objective are to be undertaken;  
I.  To identify the current level of rents for commercial and residential properties in the study area. 
II.  To ascertain and examine the factors influencing the rents being commanded by these properties. 
III.  To specify the implications of rental variation on decisions to acquire those properties. IV.   To determine the trend in rental values for residential and commercial properties in the study area.

1.4  SIGNIFICANCE OF THE STUDY

The finding of this study will be of benefit to the following; Firstly, tenants who are charged rents based on different reasons, especially when the properties are of the same nature (physically). This will again enable the investors not only to understand how occupier thinks, but also why and the things they consider before acquiring properties for certain uses. For example residential and commercial use. Secondly, the generality of the public can now understand the reason why the rents being commanded by these properties have to differ. Lastly, this research work will help to determine the factors influencing, commercial and residential properties which is an essential pre-requisite to successful development as well as stimulating interest in the students to carryout out further research on the topic.

1.5  SCOPE OF THE STUDY

The study covers a period of three years (2002 to 2004) and it is restricted to selected properties (Residential and commercial) comprising blocks of flat and tenements in Ogui New Layout, Port-Harcourt.

1.6  LIMITATION OF THE STUDY

Expectedly, this work met with some hindrances during the stage of data collection. The issue of rent passing on a property (residential or commercial) is usually regarded as classified information, which is not easily disclosed to people particularly researchers. This was largely suspected to be the reason why some Estate surveyors, property owners, tenants, Estate firms, property companies and even Estate agents who where approached through oral interviews, discussions and visitations found it rather difficult to reveal essential information despite every explanation that the exercise is strictly for academic purposes, a good number of them, still nursed the fear that it may be for property rating and taxation purposes. There was also the problem of logistics occasioned by the society. The researcher worked with a very light  budget throughout the period of study as the frequent and repeated visits to relevant persons and offices entailed quite some money. Moreover, also recall that some of the interview respondents were not co-operative as they kept on playing to the gallery as a means of avoiding supplying the required information. On a general not however, the researcher ensured that these bottle  necks never affected the findings of this study since the success far outweighed the hindrances as enumerated. 
1.7      DEFINITION OF KEY TERMS 
In a study of this magnitude, it is necessary to define the various terms to distinguish between operational definitions and constitutive definitions to avoid ambiguity. Constitutive definition involves substituting the concept or construct being defined with other concepts or constructs. Operational definition requires that the concept or construct be assigned a type of meaning which one wants it to carry throughout the study (Asika, 1999).   
Facilities Management, as applied to the hospitality sector, is defined as the proactive management of constructed facilities and organizational assets to improve their efficiency and add value to their performance and services (Okoroh, Jones and IIozor, 2003). This is in tandem with Alexander’s (1996: 1) definition as ‘the process by which an organization delivers and sustains support services in a quality environment to meet strategic needs’. This study borrows from these two definitions and proposes that facilities management, as applied to the property  business, is the proactive management of facilities, support services and organizational assets to improve their efficiency and add value to the core accommodation they provide for their customers to meet organizational strategic objectives. Facilities, in the context of property s, include buildings, industrial kitchen equipment, restaurant, halls of all categories, central air-conditioning system, fans, elevators, lifts, electrical installations, escalators, bakery equipment, recreational facilities including golf courses. This essentially tallies with the Royal Institution of Chartered Surveyors’ Facilities Management Skill Panel’s (1993) [Cited in Owen, 1993] assertion that FM consists of the management of support services; the management of property and the management of information technology. This research adopts this definition totally and as an exploratory study focuses on the three (support services, property and information technology) as they apply to property  organizations. 
Property  Effectiveness Effective property  combines resources and activities to generate the property  environment vital to the success of the organization. At corporate level, it contributes to the delivery of strategic and tactical objectives. On a day-to-day level, effective property  provides a safe and efficient working environment which is essential to the performance of the establishment and give the customer what he wants and needs at a price he is prepared to pay while the property  sells itself. 
Property Stakeholders Property  stakeholders are the people who are involved in property  organizations either as investors, general managers, and property  workers of all categories including line staff and facilities managers and property  users or customers. 
Management Style This refers to property asset sustenance method that is being applied in the running of the property  and it could be maintenance management, property management or facilities management 
Operational Excellence: This according to Torkildsen (1992) is anything or everything being done to satisfy customers’ requirements and meet the organizational goals and objectives in a sustainable way. This study adopts this definition for its operation. 
Support Services: These are functions that are accessories or adjunct to the core services in many organizations. For property  businesses some are rendered as revenue yielding activities while some are part of the total package. They include mail services, fleet cars, catering, reception, housekeeping, and office administration; refuse disposal, reprographics, car park management, horticulture and porterage. This is in agreement with the schedule of support services as identified by (Owen, 1995). 
Strategic Estate Management Aakers (1984:6) defined strategy as “the development of a sustainable competitive advantage with which to compete in a chosen product/market”. However, in line with Thorncroft’s (1965) view and for this research, strategic estate management means property assets’ management decisions that determine the overall direction of business and its ultimate viability in the light of the predictable, the unpredictable and the known and unknown changes that may occur in its most immediate surrounding environments which are considered sustainable. Such decisions may include adoption of facilities management, sales and lease back and change of use of strategic properties.

1.8        THE STRUCTURE OF THE THESIS 

The thesis consists of seven chapters, organized in a logical manner in order to enable the readers to appreciate the thoughts of the author in achieving the objectives of the study. The chapters are organized as follows: Chapter One is the introductory chapter and it provides the background of the study, the statement of the research problem, aim and objectives, justification for the study, scope of the research, limitation of the research, definition of key terms and the structure of the thesis. Chapter Two deals with the review of the related literature, which is structured into a discussion of the whole essence of facilities management detailing its history, goals, and functions. Further the chapter reviews previous empirical studies, which basically are current research studies laden with quantitative analysis of facilities management and property  businesses. Chapter Three presents the concept and the theoretical framework of the research. It is composed of the outlines of the researcher’s process of thought, summary of a priori expectations and the theoretical framework.  Chapter Four describes the research method. It is composed of the setting of the study, the research design, population of study, sampling design/sampling frame, sampling size, data requirements, method of data collection, the techniques of refuting a priori expectations, method of developing the conceptual framework of the facilities management compliant property  and method of data analysis. Chapter Five presents the analysis of data and interpretation of results while Chapter Six discusses the results. Finally, Chapter Seven focuses on the summary of findings, conclusion and discussion of implication for theory, practice and research.

1.9     CHAPTER SUMMARY

This introductory chapter deals with the research theme and the nature of the problem to be investigated. Others include the research problem, the aim, objectives, and justification of the study, the study area, and definition of key terms. The next chapter dwells on the review of related literature.