Empirical Investigation Of The Effect Of Planning Regulations On Commercial Property Values
The essence of town planning regulations in urban centres is to ensure that activities are organised and developed in physical space with due consideration for protection of public interest which includes health, safety, convenience, efficiency, energy conservation, environmental quality, social equity, social choice and amenity. The planning regulations are the various town planning framework (technical and legal) put in place which are to be strictly adhered to in order to achieve the goals of orderly development within the society. The study therefore examined the effects of planning regulations and identified issues that could be resolved to enhance commercial property values in metropolitan Lagos using Ikeja and Victoria Island as case study.
Respondents were Estate Surveyors and Valuers practising in Ikeja and Victoria Island areas of the metropolis. A total of one hundred and ten (110) structured questionnaires were administered on the respondents. Data collected were analyzed using frequency count and percentages, mean and standard deviation, Pearson’s correlation and linear regression.
The study revealed that there was a significant relationship between planning regulations and commercial property values. It also revealed that there was a significant difference in the individual effect of various planning regulations on commercial property values as development control, zoning, setback/ air space, plot coverage and parking requirement that affected property values in the outlined descending order. It is therefore recommended that government should ensure proper land use planning and that people should be made to comply with all statutory regulations. There is also the need for the proper coordination of all government agencies responsible for land use activities.
Table of Contents
- Title page
- Table of Contents
- List of Tables
- List of Figures
- 1.1 Background of the Study
- 1.2 Statement of Problem
- 1.3 Research Questions
- 1.4 Aim and Objectives
- 1.5 Research Hypothesis
- 1.6 Significance of the Study
- 1.7 Scope of the Study
- 1.8 Limitations of the Study
- 1.9 The Study Area
- 2.1 Introduction
- 2.2 Town Planning
- 2.2.1Town Planning Ordinances Experience in Nigeria
- 2.2.2 The Land Use Act (Cap. 202 of the laws of Nigeria 1978) and physical planning
- 2.2.3 The 1978 Land Use Act and Land-use planning in Nigeria
- 2.2.4 Urban and Regional Planning Act of 1992 and Commercial Properties
- 2.3 Planning Regulations
- 2.4 Planning Regulations that Affects Commercial Property Values25
- 2.5 Tools of Development Control 3
- 2.6 Effects of Planning Regulations on Property Values
- 2.7 Concept of Property and Property Values
- 2.8 Determinants of Property Values
- 3.0 Introduction
- 3.1 Research Design
- 3.2 Method of Data Collection
- 3.3 Sample Frame
- 3.4 Sample Size
- 3.5 Sampling Techniques and Procedure
- 3.6 Research Instrument
- 3.6 Analytical Techniques
Data Analysis and Findings
- 4.0 Introduction
- 4.1 Socio-economic Status of Respondents
- 4.2 Types of Planning Regulation that Affects Commercial Activities
- 4.3: Effect of Planning Regulations on Commercial Property Values
- 4.4 Importance of Planning Regulations to Commercial Property Values in the Study Area
- 4.5 Hypothesis Testing
Summary of Findings, Recommendations and Conclusion
- 5.1 Introduction
- 5.2 Summary of Findings
- 5.3 Recommendations
- 5.4 Conclusion
- (Questionnaires to Estate Surveyors and Valuers)
Lists of Tables
- Table Page
- Table 3.1 Sample Size of the Study Area
- Table 4.2.1. Gender of Respondents
- Table 4.2.2 Professional Qualification of Respondents
- Table4.2.3 Highest Educational Qualification of Respondents
- Table 4.2.4 Post Qualification Work Experience of Respondents
- Table 4.2.5 Types of Planning Regulations that Affects Commercial Property Values in Lagos Metropolis
- Table4.2.6 Effects of Planning Regulations on Commercial Property Values
- Table4.2.7: Rental Values of Commercial Properties at Ikeja
- Table 4.2.8: Rental Values of Commercial Properties at Victoria Island
- Table 4.2.9 Factors Influencing Rental Values of Commercial Properties in the Study Area
- Table 4.2.10: Importance of Planning Regulations on Commercial Property Values in the Study Area
- Table4.3.1 Planning Regulations and Commercial Property Values
- Table 4.3.2: Model Summary
List of Figures
- Fig 1.1: Map of Metropolitan Lagos
- Fig 2: Factors Determining Property Values
1.1 Background of the Study
Various authorities and scholars (Sukuran & Ho, 2008; Owei et al., 2010; Nnah et al., 2007) have given different definitions of town and physical planning. According to Sukuran and Ho (2008), town planning system is principally a system of preventive control of various land uses patterns where the controlling authority would not allow any approval for development activity if adverse impact on surrounding environment was visualized. Town planning can be seen as a means of increasing the values of private and profitable uses of land. Yet fragmented and multiple private interests in land restrict private owners from altering radically or enhancing the overall pattern of use, and multiple ownership simultaneously retards the transfer of land to more profitable users and inhibits large –scale development.
Therefore, in this context, town planning can be seen both as means of establishing complementarity of land uses while keeping conflicting uses apart through such devices as zoning, and as a means of speeding up the transfer of land between uses. By creating a climate of greater certainty; the zoning and density control aspects of town planning eliminate some of the imperfections of the property market, and enable land to move more readily to its highest and best use (Balchin, et al., 1995)
Owei et al. (2010) described physical planning as a process aimed at achieving orderly physical development with the overall aim of evolving a functional and live-able environment where individual and common goals can be achieved. The above definitions infer that planning is aimed at helping the society achieve various beneficial goals. Planning is regarded as a mechanism for the government to exercise its control on the urban development process.
In Nigeria, Town Planning is interpreted in section 18 of the Town Planners Registration Council Decree No. 3 of 1988 (TOPREC), as the theory and practice of town and country planning by the ordering and control of the citing and erection of buildings and other structures and the provision of open spaces and such similar use of land, as the case may be, for the improvement of the human environment. Essentially, town planning is concerned with the spatial ordering of land use both in the urban and rural settings for the purpose of creating functionally efficient and aesthetically pleasing environment for living, working, circulation and recreation. For any system to work as expected there is always the need for control and, balance which is a form of regulation for necessary operation. According to Nnah et al. (2007),Planning seeks to guide the way our towns, cities and countryside develop. This includes the use of land & buildings, the appearance of buildings, landscaping considerations, highway access and the impact that the development will have on the general environment.
Regulations are enforced as part of the planning strategy ‘to conserve and promote public health, safety convenience, and general welfare of the people and to provide for the future growth and improvement of the area’ (Booth, 2007). The planning regulations are the various town planning framework (technical and legal) put in place which are to be strictly adhered to in order to achieve the goals of orderly development within the society. To this end, it is the systematic assessment of land and water potential, alternatives for land use, and economic and social conditions in order to select and adopt the best land-use options. (Young, 1993).
As mentioned by Dale and Mclaughlin (1999), there are two basic approaches to regulating how land is developed and used. This can be by way of Legislation applying to all properties uniformly: This includes a wide variety of rules governing the physical location of economic activities within jurisdictions; regulations governing the design, height, or capital intensity of commercial and industrial property and a permit system in which a property owner must make application at the time of a proposed development. Considering commercial property in Lagos metropolis, a commercial property is a bundle of goods. It refers to buildings or land intended to generate a profit, either from capital gain or rental income. Commercial property includes office buildings, industrial properties, hotels, malls, retail stores, warehouses, farm land and garages.
As it is being experienced in Lagos metropolis, most areas are changing residential property to commercial use largely because they command high rental value and a property owner is always inclined to that use that will command highest and best value (Osagie et al., 2012). Various reasons have been given for this, part of which includes town planning regulation. It is against this background that this research examines the effectiveness of planning regulation in relation to commercial property values in the Lagos Metropolis to determine the effects that adherence to planning regulation has on commercial properties.
1.2. Statement of Problem
Jaeger (2006) asserted that planning regulations could affect the market value of a property in a variety of ways. He also noted that while some of the effects might be straightforward; in most cases they are complex and can easily be misunderstood or misinterpreted. In correlation with the above assertion, it has been observed that different people have different perspectives about the level of positivity or negativity of planning regulations as regards commercial properties. For instance, when a regulation restricts the use of a particular commercial property due to strict adherence to zoning regulations, which is meant to control haphazard development in the city, such a plan may end up increasing the economic value of the property especially in the Central Business Districts (CBDs).
In such a situation, the demand for commercial properties exceeds the supply in the vantage area and will resultantly inflate the value of such properties. This will have positive effects on the commercial property owners but can be seen in a negative manner by the end users of properties in such an area due to high rental values.
Further discussing likely problems that may arise from planning regulations, Jaeger (2006) stated that land-use regulations could cause a reduction in property value where the supply of land for an allowed use was higher than it would have been without the land-use regulation, while additional supply could cause a drop in the market price due to downward sloping demand. Thus the major problem of haphazard development in some planning regulation is that of abnormally high property values in some areas while lowering value in other areas. It is of pertinent that more studies are carried out to identify planning regulations that affect commercial property value for equal benefit of owner and tenants of the properties. Data on these issues are lacking and hence, this study is necessary to identify types of planning regulations affecting commercial property values in the Lagos metropolis. This study will resolve the following research questions.
1.3 Research Questions
This study focuses on the effect or impact of planning regulations on commercial property values in metropolitan Lagos. Some pertinent questions to enable the study attain its stated objectives are as follows:
- What are the types of planning regulations that affect commercial property values in the study area?
- Is there any relationship between planning regulations and commercial property values?
- What are the effects of planning regulations on commercial property values in the study area?
- What is the relative importance of various planning regulations on commercial property values?
1.4 Aim and Objectives
The aim of this research is to determine the effects of planning regulations on commercial property values in metropolitan Lagos. The objectives are to:
- To identify the types of planning regulations that affect commercial property values in the study area.
- To investigate the relationship between planning regulations and commercial property values
- To evaluate the effects of these planning regulations on commercial property values in the study area.
- To analyze the relative importance of various planning regulations on commercial property values in the study area.
1.5 Research Hypothesis
There is no significant relationship between planning regulations and commercial property values in Lagos metropolis.
There is no significant difference in the individual effects of various planning regulations on commercial property values
1.6 Significance of the Study
Various studies have been conducted on the effects of planning regulations on property values.
According to Jaeger (2006), the planning system can have a significant impact on land values. He stated that for example, in the United Kingdom, a piece of property can be worth a few thousand pounds before the grant of permission and millions afterwards. Land-use regulations in one part of a city may cause downward value changes, but at the same time may increase the value of land in another locality where the regulations do permit development. Property owners tend to assume that if only planning regulations did not stand in their way, a lucrative type of development would “land” on their own plot of land (Moore, 2005).
Ajibola et al. (2011) examined the relationship between urban planning and residential property values in some selected neighbourhoods within Agege Local Government council area of Lagos metropolis. He found out that there is significant level of difference in residential property values between the planned and unplanned residential areas. It has been assumed that land-use regulations invariably reduce property values when, in fact, they often have positive effects (Jaeger, 2006).
It has also been observed that the relationship between land use regulations and property values has been the focus of many studies neglecting planning a service that provides a scheme that facilitate physical development in an urban area. Grout, Jaeger, and Plantinga (2009) examined how Oregon’s land use planning system affects land prices in the Portland metro area. Since Oregon’s land regulations are intended to guide and control the location of development rather than to limit the supply of developable land, they should not produce scarcity-induced price increases. Using data on land values for vacant parcels in and around the Portland Urban Growth Boundary (UGB), they employ a regression discontinuity design. The researchers concluded that, Oregon’s landmark land use planning system was designed to influence the location of development, but not to constrain the amount of development.
According to Jeager and Plantiga (2007) when a land use regulation disallows or restricts a particular type of development or use of a property. If the restricted use of the property would yield higher profits to the landowner than its current use, the regulation would decrease the value of the property. If a property is essentially not feasible to develop then no decrease in value would result from a regulation that restricts development (Jeager and Plantiga, 2007).
This study is vital as a means of assisting planners to have a full understanding of the market implications and as a means of plugging the gaps in academic research on the subject. It will also help government agencies in determining more fairly appropriate charges and taxes to levy in order to recapture value increments in commercial property arising from planning regulations.
1.7 Scope of the Study
The study focused on commercial properties in Metropolitan Lagos. Due to the magnitude, terrain and complex nature of Lagos State, the study was limited to Ikeja and Victoria Isalnd. Reason for this is that most estate surveyors and valuers are predominant in Ikeja and Victoria Island which itself are part of four zones identified within the larger Lagos metropolis. The four zones (Lagos Island, Apapa, Lagos Mainland, and Ikeja) represent commercial hubs of Lagos metropolis. Other studies reveal that there are five types of commercial properties in the study area. Viz, retail shop premises, banking spaces, office properties ware house and non-specific commercial properties.
This research, however, focused on offices, shops, banking spaces, and other types of commercial uses in the study area to the exclusion of residential, industrial, and non-specific type of commercial properties. Some factors have dictated the choice of Victoria island and ikeja. Firstly, the property market in the study area is well developed and it is possible to identify and analyze variations. Comprehensive data are available on commercial property values in the study area which is one of the few cities in Nigeria offering opportunity for comprehensive survey of its commercial properties, with enlightened occupiers of commercial premises thereby making data collection possible. Secondly, a number of property magazines are in circulation in the city where estate surveyors and valuers advertise commercial properties available for sale or letting. This makes the property market very active and up-to-date with stakeholders, prospective tenants, property owners, and investors versatile and having a good knowledge about the goings-on in the market.
Data on the values of commercial properties in Lagos metropolis would be gathered from practicing estate surveyors and valuers that operate in Victoria Island and Ikeja because large numbers of registered firms have their offices located in these locations and they also serve as the commercial hub in Lagos metropolis. According to NIESV (2014), more than fifty (50) percent of estate surveyors and valuers have their offices in the Lagos metropolis indicating that Lagos state has the highest population of practicing estate surveyors and valuers in Nigeria. This serves as a basis for choosing Lagos based practitioners as the study population.
1.8 Limitations of the Study
The study focused on the effects of planning regulations on commercial property values in Lagos metropolis. The study therefore analyzed the effects of planning regulations especially development control, building regulations, zoning, height restrictions and fencing on commercial property values in Victoria Island and Ikeja. The data were gathered through personal observation and opinions of Estate Surveyors and Valuers practicing in the study area as elicited through the use of a structured questionnaire.
The accuracy, or otherwise, of such opinions although not in doubt was not investigated. Apart from these, some challenges were encountered during the study. By virtue of the busy nature of estate surveying and valuation practitioners there was considerable reluctance on their part to volunteer information. Some of the respondents estate surveyors and valuers, delayed in completing the questionnaires and it took personal influence of the researcher (as their colleague) to obtain their eventual impressive responses. These limitations however neither affected the quality of data collected nor the conclusions drawn from it.
1.9 The Study Area
The study is limited to metropolitan Lagos which is home to many companies and industries. The city is located in the south-western part of Nigeria. The city of Lagos was under the Lagos City Council. The regions of Ikeja, Agege, Mushin, Ikorodu were under the former Western Region. According to Oni (2001), the boundaries of metropolitan Lagos as consisting of the territory within Latitudes 6°34′60″N and Longitude 3°19′59″E along the West African coast. Lagos was the capital city of the country before it was replaced with Abuja on 12th December, 1991. However, Lagos remains the commercial nerve centre of Nigeria as more than half of Nigeria’s industrial capacity is located there. It is the largest metropolitan area in Nigeria (Ayeni, 1979). Lagos State is made up of twenty local government council areas out of which sixteen form the metropolitan Lagos.
The state is the smallest state in Nigeria in land area with an area of about 358,861 hectares or 3577sq.km (Odumosu, 1999). This represents only 0.4 percent of the entire area of the country. Lagos metropolis lies generally on low lands, with about 17500 hectares of built-up area. The population growth rate of Lagos has serious implications on the trend of urban land use and development. This has serious consequences on land use planning in the state especially in urban areas. The city is a typical example in the history of growth and development of urban areas in Nigeria. This has dictated the choice of Lagos metropolis to know the planning regulations that are in place and to also know their effects on commercial property value
5.0 Summary of Findings, Recommendations and Conclusion
This chapter presents the summary of the research findings based on the objectives set out at the onset. The results are discussed in light of findings from previous studies with a view to highlight the contributions of the current study to knowledge in the field.
5.2 Summary of Findings.
The research examined the effects of planning regulations on commercial property values in some parts of Lagos metropolis using Ikeja and Victoria Island as a case study. the objective of the research work is to identify the types of planning regulations that affect commercial property values in the study area, to investigate the relationship between planning regulations and commercial property values also to evaluate the effects of these planning regulations on commercial property values in the study area and to analyze the relative importance of those effects on commercial property values in the study area. Data were collected from primary and secondary sources. A total number of 110 questionnaires were administered on estate surveying firms in Victoria Island and Ikeja.
- The research also revealed the types of planning regulation that affects commercial property values in Lagos metropolis. The planning regulations affecting commercial property values in the study area are development control, zoning, setbacks and air space, plot coverage, height requirement and parking requirement. Based on the result of the analysis, development control has been the predominant planning tool affecting commercial property values in the study area.
- The research revealed that planning regulations has a great effect on the price, demand, supply, availability, location, height, development approval and type of development in Lagos metropolis. Reason being that, planning regulations dictate the type of property to be developed in a particular location, it dictates the height. It also requires a lot of processes to get approval for the development of property. All these have a great impact on commercial property values in the study area. Commercial property that covers a large land area require more money for approval and more expense cost and price is been incurred, this will increase the price of the commercial property. Also, the planned state of the neighbourhood also has a great influence on the price of commercial properties within Lagos metropolis.
- The research revealed the rental trend for five years of commercial properties like purpose built office space, partitioned office, open planned office and shopping mall in Ikeja and Victoria Island, reveals that property values show upward movements (trends) in the two neighbourhoods, the rental values varies across the study area. Factors responsible for this include strategic location, proximity to major roads. All these explain the reason why the values of these properties are high in the study area.
- The study found out that factors like Location, competition of uses, neighborhood characteristics, quality of roads, demand for commercial space and economic attributes have an influence on the rental values of commercial properties in the study area.
- The study also found out that planning regulations like development control, building regulations, zoning, plot coverage, setback and air space, height requirement, parking requirement andfencing are very important regulatory tool in the study area.
- In testing the first null hypothesis that “there is no significant relationship between planning regulations and commercial property values in the study area”. The Pearson correlations model revealed that there is that there is a significant relationship between planning regulations and commercial property values. Therefore, the alternative hypothesis was accepted
- In testing the second hypothesis using linear regression, it shows that there is a significant difference in the individual effect of various planning regulations on commercial property values.
The following recommendations are made based on the researcher’s findings, in order to guide government, policy makers and relevant agencies.
- Effort should be laid by government, at ensuring proper land use planning; the people should be made to comply with such regulations.
- The Nigerian Institution of Estate Surveyors and Valuers should organize trainings and workshops that would enlighten the professionals in the built environment and the general public on the importance of urban planning regulations and adhering to the set down planning regulation by the authority and property developers.
- The physical planning authority should not be blinded by the quest for revenue generation and therefore over density in the area bulk especially in new imagine cities in Lagos. Consideration ought to be given to urban cohesion, setbacks, aesthetics and cultural affinity, which are the hallmarks of metropolitan areas and mega-cities across the developed countries
- There is need for new and relevant bye laws, edict, acts and regulations to channel the new course of challenges in the planning profession so that the gains associated with the discipline can be appreciated by all.
- There is also the need for the coordination of activities of all agencies responsible in one way or the other for the affairs of the cities in terms of administration, management and planning.
Effects of town planning regulations on commercial property values in Lagos metropolis were studied and specific objectives attained. The aim and objectives were achieved through the study of the types of planning regulations and their effects on commercial property values in the study area. The study areas of this research work are two selected commercial hub of Lagos metropolis. These are Ikeja and Victoria Island in Lagos metropolis. Urban Planning regulation is very essential and should not be undermined especially for an environmentally conscious nation like Nigeria. In most advanced countries, the issue of planning is often taken more seriously. It is therefore important to look at the aspect of Town Planning regulations in relation to property values especially considering the fact that research in this area is rare in Nigeria. The study reveals that town planning regulations results in increased property values. In other words, the study establishes that there is a statistically significant relationship between town planning regulations and commercial property values in the study area. It is hopeful that the research would encourage other studies particularly from the Estate Surveyors and Valuers and that the results and findings would be found as useful contribution to knowledge.
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