Diversification Potentials Of Commercial Real Estate Investments in Metropolitan Lagos

Abstract

Appropriate selections and combinations of investments that make up portfolios that have high diversification potentials, minimize risks and maximises returns are increasingly gaining attention in the investment environment.  This diversification potential can be achieved by possessing a portfolio of investments that are not affected in the same way by the ever-changing economic condition.  This study, therefore, assessed the diversification potentials of commercial real estate investments (shops and offices) in five prime locations of Lagos metropolis.  The study made use of data on the total returns on commercial real estate investments, derived from the annual average capital and rental values of the investments.  The period of data coverage is from 2007 to 2018.  Pearson’s Product Moment Correlation analysis was used in determining the ideal combinations of investments.  The statistical software used was SPSS, version 22.  The result showed that the most ideal combination of investments is shops in Yaba and Lagos Island.  These investments are also ideal for combination; offices in Yaba and shops in Ikeja, offices in Yaba and Ikeja, shops in Ikoyi and Ikeja.  Thus, the study recommends that investors should consider including in their investment portfolios the identified ideal investment combinations.