Are Commercial Properties a Good Hedge Against Inflation? Evidence from Selected Commercial Centres in Lagos

The paper examined the inflation hedging capacity of office and shop properties in Lagos Metropolis from 1998-2008 using data from registered Estate Surveyors and Valuers firms. Five locations were selected for the study based on the pace of commercial activities. A total of 35 firms that operated above 20 years were used as sample size to capture the trend in practice. The study used descriptive statistics to show the trend of returns on commercial real estate investments in percentage against the change of inflation during the period under review. Rental values were used due to the difficulty in obtaining evidence of sale as at the time of the study. The results reveal that in the short run, office property does not provide a good hedge against inflation but, does so in the long run; while shop property does not hedge against inflation both in the long and in the short runs. Investors who are into direct real estate investment should look more at office properties and, if location is anything to go by, those locations that have shown better prospects are recommended to be sought after.