Valuation Method One - Part Two - Comparing Property

"Analyse as you value, value as you analyse"

Retail Property come in all flavours including prime main street, high street, pedestrianised, shopping centre, secondary, tertiary or suburban street positions; out of town and mixed use retail parks; department; variety; retail warehouse; supermarkets; superstores and hypermarkets. All of these types of retail property have a basic approach to valuing retail - "zoning and halving back".

Zoning and Halving Back, which is based on splitting the shop into zones, the closest to the passing pedestrians has the most value (Zone A). So how do you do value it, follow the steps:
1) Divide the ground floor NIA (Net Internal Area) into 6m (the Valuation office still measures in 6.1 m intervals) zones A, B, C, etc. If the shop is more than 24 m deep then label all remaining zones with R.
2) 1 square metre of zone A then zone B would be worth 0.5 of zone A, etc and label in terms of Zone A (ITZA).
3) Upper and lower floors and non-sale areas are all valued on an overall basis and are not zoned, but allocated different values according to their use.
4) Add up the adjusted areas.
5) Result is the floor area ITZA and this forms the basis unit of comparison.

E.G.
Any type of property will have Property Value Parameters (PVP) such as the Physical Factors include Location, Accessibility, Topography, Aspect and Geology (LATAG) and the Property Specific Factors including Construction, Age, Condition, Layout & Specification (CACLS)

Once again, as with all comparable valuations, ensure that you have and use the same units of comparability.

Market evidence can be gained from Estate Agents; the specialist journals such as Estate Gazette and Property Week; auction houses; the Internet has many property databases including Rightmove.co.uk and organisations like the Investment Property Databank. (Farmland market evidence can be found in Farmland Market journal).

Office Comparisons use NIA measurements and the quality of office accommodation is of key concern to any valuer and the offices may be ranked in class. The following are just a few parameters that are used to value high class offices - car parking allocation, air conditioning, raised access flooring and low glare flush lighting. High street to urban fringe business centre will command different values.

Retail Comparisons use NIA valuations as most shops resemble warehouses, but not all, and this allows the trader space and environment to sell goods and secure the footfall. Therefore, this is why quick purchase stock is at the front and the more thought provoking and time consuming goods are at the back. This is reflected in the zoning valuations as shown above.

You may need to include a commentary on the adjustments you have made and the assumptions. But beware of the criticisms of zoning, these include:
1) An artificial process - analytical tool for a valuer, not a decision making tool for the occupier.
2) Irrelevant for retailers as they do not use zoning to arrive at rental bids, they use prospects for making a profit - the valuer rents arrangement of floor space not for the trader.
3) The zone depths are set arbitrarily by the valuer - it is a trusted approach and does not prevent the tenant from producing alternate analysis.
4) It would be better to take the relationship of the shop front to the zoning, but this depends on alternate data which may not always be present.

Industrial Valuation
Collecting evidence for industrial property valuation is similar to other methods of comparison, but beware of obtaining and interpreting evidence and explain your assumptions. With an industrial building, it is thought that there should be approx. 10% office space. If more, seek market evidence. Industrial property should be measured on GIA and to include office space unless office space is separate and can be developed separately and then that should be measured NIA. Considerations and assumptions should be commented on.

Other Property includes hotels, petrol filling stations, care homes, nursing homes and public houses will be probably valued with the profits method but investigate supporting market evidence.

Automated Valuations as in the ones where the process is streamlined for the purpose of granting loans, etc. These can be calculated by a drive by inspection and valuation; a postcode valuation or an automated process that relies on recorded comparables and is adjusted to limit risk. With more HIPs (Home Information Packs), this form of valuation may become more common.