EMPIRICAL INVESTIGATION OF THE EFFECT OF PLANNING REGULATIONS ON COMMERCIAL PROPERTY VALUES
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EMPIRICAL INVESTIGATION OF THE EFFECT OF PLANNING REGULATIONS ON COMMERCIAL PROPERTY VALUES
ABSTRACT
The purpose of urban planning regulations is to ensure that activities in physical space are organised and developed with due consideration for the 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 many town planning frameworks (technical and legal) that have been put in place to meet the goals of orderly growth within society. Using Ikeja and Victoria Island as case studies, the study investigated the effects of zoning restrictions and suggested concerns that may be rectified to increase commercial property prices in metropolitan Lagos.
Respondents were Estate Surveyors and Valuers working in the Ikeja and Victoria Island regions of Lagos. The respondents were given a total of one hundred and ten (110) structured questionnaires. The information gathered was analysed using frequency counts and percentages, mean and standard deviation, Pearson’s correlation, and linear regression.
According to the findings, there is a considerable association between planning laws and commercial property values. It also demonstrated a considerable variation in the individual effects of several planning rules on commercial property values, such as development control, zoning, setback/air space, plot coverage, and parking requirements,
which affected property values in the outlined descending order. It is consequently suggested that the government establish adequate land use planning and that all legislative rules be enforced. All government entities responsible for land use activities must also work together to ensure effective coordination.
CHAPITRE ONE
1.0INTRODUCTION
1.1 Background Of The Study
Various authorities and researchers (Sukuran & Ho, 2008; Owei et al., 2010; Nnah et al., 2007) have defined town and physical planning differently. According to Sukuran and Ho (2008),
the town planning system is primarily a preventive control system of diverse land use patterns in which the governing authority would not approve any development activity if a detrimental influence on the surrounding environment was visualised.
Town planning can be viewed as a tool for boosting the value of private and economic land usage. However, fragmented and multiple private interests in property prevent private owners from changing or improving the overall pattern of use, and multiple ownership both slows the transfer of land to more profitable users and prevents large-scale development.
As a result, in this context, town planning can be viewed as a means of building complementarity of land uses while keeping competing uses apart via techniques such as zoning, as well as a means of accelerating the transfer of land between uses.
The zoning and density control features of town planning alleviate some of the faults of the property market, allowing land to migrate more readily to its highest and best use (Balchin et al., 1995).
Physical planning, according to Owei et al. (2010), is a process aiming at establishing orderly physical growth with the overarching goal of creating a functional and liveable environment where individual and community goals can be accomplished.
According to the definitions above, planning is intended to assist society in achieving a variety of desirable aims. Planning is viewed as a technique through which the government can exert control over the urban development process.
Section 18 of the Town Planners Registration Council Decree No. 3 of 1988 (TOPREC) defines town planning in Nigeria as “the theory and practise 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.
” Town planning is essentially concerned with the spatial arrangement of land use in both urban and rural contexts in order to create operationally efficient and aesthetically beautiful environments for living, working,
circulation, and enjoyment. Control and balance, which is a type of regulation for necessary functioning, are always required for any system to work as planned.
According to Nnah et al. (2007), planning tries to direct the development of our towns, cities, and countryside. This covers the use of land and buildings, the appearance of buildings, landscaping concerns, highway access, and the overall environmental impact of the development.
Regulations are enforced as part of the planning strategy ‘to conserve and promote public health, safety, convenience, and general welfare of the people, as well as to allow for the area’s future expansion and improvement’ (Booth, 2007).
The planning regulations are the many town planning frameworks (technical and legal) that have been put in place to meet the goals of orderly growth within society.
To that aim, it is the methodical evaluation of land and water potential, land-use possibilities, and economic and social conditions in order to select and implement the optimal land-use options. (Young, 1993).
Dale and Mclaughlin (1999) describe two main techniques to regulating how land is produced and used. This can be accomplished through legislation that applies uniformly to all properties: this includes a wide range 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 apply at the time of a proposed development. In terms of commercial property in Lagos, a commercial property is a collection of items.
It refers to structures or land that are meant to make a profit, whether through capital gain or rental income. Office buildings, industrial sites, hotels, malls, retail stores, warehouses, farm land, and garages are all examples of commercial property.
As shown in Lagos, most areas are converting residential property to commercial use, owing to the high rental value, and a property owner is always predisposed to that use that will fetch the greatest and best value (Osagie et al., 2012). Several explanations have been cited for this, including town planning regulations.
This study studies the effectiveness of planning regulation in relation to commercial property values in the Lagos Metropolis to identify the effects that adherence to planning regulation has on commercial properties.
1.2. Statement of the Problem
According to Jaeger (2006), planning restrictions can affect the market value of a property in a variety of ways. He also mentioned that, while some of the consequences may be simple, in most cases they are complex and easily misunderstood or misread. In line with the preceding assumption,
it has been noted that various people have differing opinions on the level of positive or negative of planning restrictions pertaining to commercial premises. For example, if a regulation restricts the use of a specific commercial property due to strict adherence to zoning regulations,
which is intended to control haphazard development in the city, such a plan may end up increasing the economic value of the property, particularly in Central Business Districts (CBDs).
In such a case, the demand for commercial properties in the vantage area exceeds the supply, causing the value of such assets to rise. This will benefit commercial property owners but will have a detrimental impact on end users of properties in such an area due to high rental values.
In addition, Jaeger (2006) stated that land-use regulations could cause a decrease 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 market price due to downward sloping demand.
Thus, the main issue with random development in some planning regulations is abnormally high property prices in some regions while decreasing value in others. More research is needed to uncover planning restrictions that affect commercial property value for the benefit of both property owners and tenants.
Because data on these topics is scarce, this study is required to determine the sorts of planning restrictions influencing commercial property values in the Lagos city. The following research issues will be addressed by this study.
1.3 Research Questions
This research looks at the influence or impact of planning restrictions on commercial property values in Lagos. The following are some essential questions to help the study achieve its stated objectives:
1.What are the different types of planning restrictions in the study area that affect commercial property values?
2.Is there a link between planning laws and commercial real estate values?
3.How do planning laws affect commercial property values in the study area?
4.How important are various planning restrictions in terms of commercial property values?
1.4 Aims and objectives
The purpose of this study is to investigate the influence of planning rules on commercial property values in Lagos. The goals are as follows:
a. Determine the sorts of planning laws that have an impact on commercial property values in the research area.
b. to look into the connection between planning regulations and commercial property values
c. To assess the impact of these planning laws on the value of commercial property in the research region.
d. To assess the impact of various planning restrictions on commercial property values in the research region.
1.5 Research Proposal
1st Hypothesis
In Lagos, there is no significant relationship between planning laws and commercial property values.
2nd Hypothesis
Individual effects of various planning restrictions on commercial property values do not differ significantly.
1.6 Significance of the Research
Several studies on the effects of planning regulations on property values have been done.
The planning system, according to Jaeger (2006), can have a major impact on land values. He added that in the United Kingdom, for example, a piece of property can be worth a few thousand pounds before permission is granted and millions afterwards.
Land-use laws in one area of a city may reduce the value of land in that area while increasing the value of land in another area where the regulations permit development.
Property owners frequently believe that if only planning laws did not exist, a profitable sort of development would “land” on their own plot of land (Moore, 2005).
Ajibola et al. (2011) investigated the association between urban planning and residential property values in a few selected neighbourhoods within Lagos’ Agege Local Government Council jurisdiction.
He discovered a considerable variation in residential property values between planned and uncontrolled residential zones. It has been assumed that land-use rules always lower property values when, in reality, they frequently increase them (Jaeger, 2006).
It has also been observed that many studies have focused on the relationship between land use restrictions and property values, while overlooking developing a service that provides a system that facilitates physical development in an urban region.
Grout, Jaeger, and Plantinga (2009) investigated the impact of Oregon’s land use planning system on land values in the Portland metropolitan area.
Because Oregon’s land restrictions are meant to guide and control the site of development rather than to limit the quantity of developable land, scarcity-induced price hikes should be avoided. They use a regression discontinuity design with data on land values for unoccupied parcels in and around the Portland Urban Growth Boundary (UGB).
According to the researchers, Oregon’s unique land use planning system was designed to impact the site of growth but not to limit the amount of development.
When a land use law prohibits or restricts a specific form of development or use of a property, according to Jeager and Plantiga (2007). If the restricted use of the property yielded greater profits to the landowner than its existing usage,
the limitation would reduce the property’s value. If a property is essentially undevelopable, a restriction restricting development has little effect on its value (Jeager and Plantiga, 2007).
This research is critical for assisting planners in fully understanding the market consequences and for filling gaps in academic research on the subject. It will also assist government agencies in calculating more equitable charges and taxes to levy in order to recuperate value increases in commercial property caused by planning laws.
1.7 Scope of The Study
The research concentrated on commercial properties in Metropolitan Lagos. The study was limited to Ikeja and Victoria Island due to the size, terrain, and complexity of Lagos State. The reason for this is that the majority of estate surveyors and valuers are concentrated in Ikeja and Victoria Island, which are part of four distinct zones within the broader Lagos city.
Lagos’ four zones (Lagos Island, Apapa, Lagos Mainland, and Ikeja) serve as commercial hubs for the city. According to other studies, there are five types of commercial premises in the study region. For example, retail shop premises, banking spaces, office properties, warehouses, and general commercial properties.
However, this analysis excluded residential, industrial, and non-specific business assets in favour of offices, stores, banking premises, and other sorts of commercial uses in the study region.
Some factors influenced the selection of Victoria Island and Ikeja. To begin, the property market in the research area is well developed, and variations can be identified and analysed.
Comprehensive data on commercial property prices are available in the study region, which is one of the few cities in Nigeria that offers the chance for a comprehensive survey of its commercial assets, with enlightened occupants of commercial premises allowing data gathering.
Second, there are several property journals in circulation in the city in which estate surveyors and valuers promote commercial properties for sale or letting. This keeps the property market lively and up to date, with stakeholders, prospective tenants, property owners, and investors being adaptable and knowledgeable about market happenings.
Data on the values of commercial properties in Lagos metropolis would be gathered from practising estate surveyors and valuers who operate in Victoria Island and Ikeja because these areas are home to a large number of registered firms and also serve as the commercial hub in Lagos metropolis.
According to NIESV (2014), more than fifty percent (50%) of estate surveyors and valuers have offices in Lagos, indicating that Lagos state has the biggest population of practising estate surveyors and valuers in Nigeria. This is the foundation for selecting Lagos-based practitioners as the study population.
1.8 Limitations of the Research
The research looked at the effects of planning rules on commercial property values in Lagos. As a result, the study investigated the effects of planning laws, including development control, construction regulations, zoning, height limitations, and fencing, on commercial property values in Victoria Island and Ikeja.
The data were acquired by personal observation and the opinions of Estate Surveyors and Valuers working in the research region, which were elicited using a standardised questionnaire. Although the accuracy of such judgements was not in doubt, it was not investigated.
Aside from these, certain difficulties were faced during the research. Due to the time constraints of estate surveying and valuation practitioners, they were hesitant to offer information. Some of the respondents, estate surveyors and valuers,
were slow to complete the surveys, and it needed the researcher’s personal influence (as their colleague) to collect their eventually remarkable results. These constraints, however, had no effect on the quality of the data obtained or the conclusions reached from it.
1.9 The Research Area
The study is limited to Lagos, which is home to many businesses and industries. The city is in Nigeria’s south-western region. The Lagos City Council was in charge of the city of Lagos. The former Western Region included Ikeja, Agege, Mushin, and Ikorodu. Oni (2001) defines the boundaries of metropolitan Lagos as the territory between Latitudes 6°34′60′′N and Longitude 3°19′59′′E along the West African coast.
Lagos served as the country’s capital until December 12, 1991, when it was replaced by Abuja. However, Lagos remains Nigeria’s commercial nerve hub, with more than half of the country’s industrial capacity based there.
It is Nigeria’s largest urban region (Ayeni, 1979). Lagos State is divided into twenty local government council areas, sixteen of which compose the metropolitan Lagos.
The state has the smallest land area in Nigeria, covering around 358,861 hectares or 3577 square kilometres (Odumosu, 1999). This accounts for only 0.4 percent of the country’s total land area.
The Lagos metropolis is located on low land and covers around 17500 hectares. Lagos’s population growth rate has major consequences on the trend of urban land usage and development. This has major implications for state land use planning,
particularly in metropolitan regions. The city is a typical example in Nigeria’s history of urban expansion and development. This has forced the selection of Lagos metropolis to understand the development regulations in place as well as their effects on commercial property value.
Figure 1.1: Metropolitan Lagos Map
University of Lagos Department of Surveying and Geoinformation (2014)
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