Office Property Appraisal and the Proper Valuation Techniques, Part 1

When performing a real estate appraisal for an office property, the appraiser must first understand the theories, distinctive terminology, ideologies, and analytical methods associated with office building valuation. Distinctive emphasis should be given to the income capitalization approach and the intricacies of determining a value for properties with several tenants. The appraiser should be familiar with the attributes associated with the various styles of office buildings, significant inspection concerns, and industry measurement standards. This should be followed by a detailed investigation of the income approach by examining substitute lease types, appropriate procedures for predicting office rents, vacancy rates, and operating expenses, as well as suitable methods for choosing capitalization and discount rates. The appraiser should also consider the important concerns associated with the Cost Approach as well as the Sales Comparison Approach when undertaking an appraisal of an office building. In the first part of this series we will take a look at a major issue that should be addressed when using the Sales Comparison Approach in the valuation of an Office Building.