EFFECT OF ACCESSIBILITY ON COMMERCIAL PROPERTY VALUE

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EFFECT OF ACCESSIBILITY ON COMMERCIAL PROPERTY VALUE

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Roads may be classified as international, inter-city or intra-city; international and inter-city roads are usually major or arterial roads while intra-city roads are routes within a city and may be minor or major (arterial). The pattern of road network somewhat influences ease of movements and provides accessibility to various land uses which compete for available spaces along the arterial roads. Commercial properties cluster along such roads to benefit from the advantages of agglomeration. Also, competition makes locations along the arterial roads to be at their highest and best uses, which translate into high rental values compared to other locations that lack such competition.

As result of the advantages, developers, financiers and investors in commercial properties require data on the level of rental income that a development project could reasonably be expected to realize in a transaction involving willing and able parties to such project. In addition, the overall impact of risks and uncertainty in the property market calls for tool to aid in predicting the future trend in commercial property market with some measure of accuracy. This is to ensure that income that a given commercial property generates in the nearest future will continue to recoup the capital outlay and be sustained subsequently.

In the choice of site for real estate development, the investors usually desire the location with potentials for high positive net return. In many cases, decisions on site selection are based on intuition or mere subjective assumptions, especially in developing economies; this often leads to defective and abandoned projects. For viable project development projects, proper site selection is largely related to accessibility with the innate assumption that must be based on scientific techniques.

A number of approaches have been adopted in determining the most accessible site and that is most likely to be viable in terms of demand for a proposed development project upon its completion. In other words, the techniques assist in explaining the effects of accessibility on property values. The modern techniques include cummulative-opportunity type measure, gravity-based measure, weighted-average distance, utility-based measure, space syntax, route structure analysis, multiple regression model, hedonic model, expert system heuristics, and graph theory (see Cole and King, 1968; Hay, 1973; Ogunsanya, 1986; Rallis, 1988; Geertman and Ritsema, 1995; Kwan, 1998; Wyatt, 1999; Aderamo, 2003; Marshall, 2005; Oni, 2009).

STATEMENT OF THE PROBLEM

It is pertinent to state that decision on site selection and accessbility in developing economies is often based on intuition and mere physical observation of the neighbourhood in which a proposed development project is to be located. Many of the real estate investments have become stalled, abandoned, or non-viable upon completion due to faulty decision on site selection. The aim of this study is therefore to determine the impact of the explanatory variables of road network (road density, length of road, accessibility), demand, supply, and location on commercial property values using Ikeja, the capital of Lagos State, Nigeria for the study.

OBJECTIVES OF THE STUDY

To understand the effect of accessibility on commercial property value
To understand the relationship between accessibility and commercial property value

RESEARCH QUESTIONS