THE IMPACT OF PROPERTY MANAGEMENT ON COMMERCIAL PROPERTY RENTAL VALUES IN KUBWA ABUJA

THE IMPACT OF PROPERTY MANAGEMENT ON COMMERCIAL PROPERTY RENTAL VALUES IN KUBWA ABUJA

ABSTRACT

This study examined the impact of property management on commercial property rental value in Kubwa Abuja in order to ensure that commercial properties are maintained in such a way that they command the highest possible net return. Specifically the study seek to determine the influence of property management on property values for commercial properties, investigate the perceptions of real estate agents relative to their relationship with landlords and tenants, evaluate factors which affect commercial property values in Kubwa Abuja, assess the challenges that are faced by property managers in managing commercial properties and to come up with measures to ensure proper management of properties. The research design adopted for the study is the survey design which allowed the research to gather information from the research population through observation, personal interview and questionnaire. In analysis of the data collected, the researcher employed statistical method of data analysis for accuracy and conciseness. The analysis was carried out in tabular form and these analyses was carry their respective percentages. The study concluded that property management, increases and maintains the value of property, that when a landlord is overly demanding, controlling, or harsh to his tenants, it might frustrate the tenants to the point that they may purposely cause damage to the property or default on their rent payments. The study recommended that property managers should communicate effectively with commercial tenants.

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

Over the past decades and beyond Nigerian society has grappled with the subject of property management or administration and has been a subject of discuss for scholars (Onyema, 2011). Property management is the art and science of managing real estate in terms of its development, maintenance, and cash flow from users and occupiers in order to achieve the greatest possible benefits for the owner and all parties interested in the property while remaining within the parameters of applicable laws and regulations (Onyema, 2011). In the absence of qualified property managers who are properly trained in the field of property management, the majority of properties have suffered from poor management and neglect.

Property management is the physical, administrative, or financial upkeep and management of real property for a fee, commission, or other pay or valuable consideration (Nevada State Real Estate Division, 2018). It is the process of maintaining and handling all day-to-day activities centred on a piece of real estate. Commercial property includes shops, malls, office buildings, and industrial parks. Offices for business, professional services, and other administrative and government functions. Shops are either a shopping mall or a consumption outlet. Industrial property is employed in production (Ball, Lizieri, & MacGregor, 2012).

Commercial property management involves specific competence to care for a person, household, or corporation’s investment in buildings to maximise return (Oladokun and Ojo, 2011). According to Ge and Du (2017) property value is impacted by a multitude of elements, and determining those characteristics is an important part of property assessment. Absence of property management leads to inadequate maintenance of commercial property. Thus, it is critical to maintain commercial properties in good condition to maximise economic return. Effective property management is one of the critical aspects needed to maximise property investment returns. Absence of property management leads to inadequate maintenance of commercial property. Thus, it is critical to maintain commercial properties in good condition to maximise economic return.

In real estate, commercial property is property used to make commercial profits, including shops, malls, office buildings and industrial parks. Commercial property management entails the application of specialized skill to care for the investment, sometimes of an individual,   household   or   corporate   body   in buildings with the aim of securing highest return (Oladokun and Ojo, 2011). Commercial property value is developing an opinion on the value of the property in market value.Ge and Du (2007) stated that  property  value   is   an   essential  aspect   of property markets worldwide and determined by a variety of factors and the determination of those factors is a significant part of property valuation.

It is common for many property owners (Landlords) to forego using the services of estate surveyor or valuers (Lam & Terrence, 2016). To watch after or take care of their holdings, they appoint “caretakers.” These caretakers, in turn, have little authority, as they are only permitted to collect rent from renters and do minimal repairs on the houses under their supervision. Furthermore, they are primarily laypeople who have not received any formal estate management training (Palm, 2015). Certain real estate properties have suffered as a result of this. As a result, effective property management is critical to a property’s ability to generate the highest possible profits while also maintaining a long physical and economic life (Lam & Terrence, 2016). Good property management has progressed from the simple maintenance of a building in response to tenant complaints to the deliberate planning of building services and the efficient operation of an accounting system, all while taking into consideration the legal, economic, and social interests of both tenants and landlords (Palm, 2016).

One can readily discern between well-managed and neglected properties in several of Nigeria cities, by taking a glance about and studying some of the buildings. A properly managed portfolio of our landed properties is equally critical to our economic development as is the construction of these properties. It is also critical to the historical, social, and cultural development of our country, and it should be accorded the attention it deserves, both privately and publicly, for these reasons. According to Evans (2017), property management has never been perceived as a tough or complex industry in the previous century, and the word “property manager” simply refers to someone who is in charge of collecting rent. Evans (2017) was feared and despised by many, and it was during these times that the property manager’s primary function was to collect rent from tenants. This function continued for decades after this. Historically, landlords in Nigeria have not paid close attention to the upkeep of their properties.

The absence of property management negatively affects the physical condition of the commercial property due to poor maintenance. Therefore, it is important that the commercial properties are maintained in a sound condition to provide the greatest possible economic return. Effective property management is the only antidote necessary to generate maximum returns on property investment especially at this period of global economic crunch. The only way to ensure regular income is through proper management of property. This study therefore examined the impact of property management on commercial property values in Kubwa Abuja.

1.2       Problem Statement

Buildings, like any other physical asset, lose value with time (Sanderson, 2016). Loss of value is caused by a mixture of both natural elements such as rain or earthquakes, and human related actions such as the use of poor quality materials in construction or lack of maintenance of the buildings. Physically, the property offers discomfort to tenants owing to wear and tear of the structure. These factors can raise the depreciation rate of property and influence quality and value. When looking for accommodation for business, a person may not select the old and outdated structure with poor maintenance. This implies these structures will have little demand hence low worth on the market. In Harare, many commercial buildings are not in good shape and some are depreciating as a result of poor maintenance and bad property management. The impact of property depreciation will be the disproportionate losses in terms of asset capital values of these properties. Such structures are a threat to the occupant’s life as they can collapse and kill individuals. Such properties have become properties of low standards as a result of bad property management and lack of maintenance. If this problem is disregarded, properties will continue losing values and this will limit investment in commercial properties since investors are much concerned with higher returns.

1.3     Aim and Objectives of the

The aim of the study is to examine the impact of property management on commercial property rental value in Kubwa Abuja in order to ensure that commercial properties are maintained in such a way that they command the highest possible net return.

The specifics objectives of the study include:

1. To determine the influence of property management on property values for commercial properties.
2. To investigate the perceptions of real estate agents relative to their relationship with landlords and tenants.
3. To evaluate factors which affect commercial property values in Kubwa Abuja
4. To assess the challenges that are faced by property managers in managing commercial properties.
5. To come up with measures to ensure proper management of properties.

1.4     Research questions

The research questions are as follows;

1. How does property management affect property values for commercial properties?
2. How does the relationship between the estate agent, the property owners, and tenants affect the way property management services are delivered?
3. Which factors commercial property values in Kubwa Abuja?
4. What are the challenges faced by property managers when managing commercial properties?
5.  What measures should be taken to ensure proper management of properties?

1.6       Significance of the Study

This study examined the impact of property management on commercial property rental value in Kubwa Abuja in order to ensure that commercial properties are maintained in such a way that they command the highest possible net return. This study is aimed at closing gaps such as determining the influence of property management on property values for commercial properties, investigating the perceptions of real estate agents relative to their relationship with landlords and tenants in Kubwa and establishing factors which affect the use of property management by property owners in Kubwa, Abuja.

The finding of this study will be of benefit to the following groups;

Firstly, property owners and tenants who charged and are being charged rents based on different reasons, especially when the properties are not properly managed will know the relevance of property management and its effects of commercial property rental value. 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.

Secondly, the generality of the public can now understand the menace of poorly managed property and why such properties command poor rental value compared with properly managed properties.

Lastly, this research work will help to determine the factors influencing residential properties which are an essential pre-requisite to successful development as well as stimulating interest in the students to carryout out further research on the topic.

1.6       Scope and Limitations of the Study

The scope of this study is limited to the examination of the impact of property management on commercial property rental value in Kubwa – Abuja.

Limitation

Expectedly, this work met with some hindrances during the stage of data collection. The issue of property management and commercial property rental value 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 were 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 note 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     Scope of the Study

This study is on an analysis on the effects of property management on commercial property values using Harare as a case study. This study shall be delimited commercial properties managed by various to property management companies in Harare CBD. Companies include Knight Frank  Pvt Ltd,  Dawn Properties, Zimre Properties and others. Managerial and non- managerial employees shall be respondents of the study. This study shall be delimited to a period of between 2015 up to 2022.

1.8     Definition of Key Terms

Real  estate  refers  to  property,  land,  buildings,  air  rights  above  the  land  and underground rights below the land (Firstenberg et.al, 1998).

Property management is defined as the process of keeping a property in a good state of health, devoid of decay and in other to enhance the value of the property, yielding optimum returns on investment (Oyedele, 2013).

Commercial property includes shops, malls, office buildings, and industrial parks (Oladokun and Ojo, 2011).

Property manager refers to an individual or company that is hired to oversee the day- to-day operations of a unit of real estate. Property owners and real estate investors typically hire property managers when they are unwilling or unable to manage the properties themselves. (Palm, 2015).

Depreciation is defined as the decrease in an assets value over time due to wear and tear (Downs, 1991).

Property Value is defined as the present worth of future benefits arising from the ownership of the property (Millington, 2013).

Property maintenance refers to property maintenance refers to activities that are essential for keeping a building functional and comfortable for its occupants (Cloete, 2001).

Investment refers to the allocation of monetary resources to assets in expectation of yielding some gain or positive return over a given period of time (Kaptan, 2001).