Project Archive - Orlando Commercial Real Estate Appraiser

Office Appraisal

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Appraising Class A, Class B and Class C office space within single-tenant to multi-tenant buildings, consisting of medical, municipal or general office uses.

An appraisal of an office building is an expert, impartial assessment of its fair market value, performed by an appraiser certified by the state in which the property resides. Uses for an office property appraisal include monetary, lawful, and financial reasons, like getting a mortgage or for estate settlement. The procedure includes making a property inspection, evaluating the property’s potential for producing income, examining the physical condition, analyzing the regional market, and using the three valuation techniques including the Cost Approach, the Sales Comparison Approach, and the Income Approach.

The appraisal process

Making an inspection: A physical inspection of the property is made by the appraiser to determine its condition and any applicable features.

Data analysis: Relevant data is collected by the appraiser from sources such as the public records, market trends, and similar office properties.

Valuation approaches: The appraiser uses different approaches to estimate the value. The Cost Approach is used to estimate the reproduction or replacement cost new, estimate the depreciation which is deducted and include the estimate the value of the underlying land, which is added at the end of the approach. The Sales Comparison Approach is used to compare the unit prices of similar office properties in the area that had sold recently. The Income Approach is used to determine the office’s capability of generating income, which is frequently the best technique for income-producing office structures. Consideration is given to both the quality of the tenant and the terms of the lease agreement. The income potential can include recent rental rates, contract terms, and the quality and strength of the tenant and their ability to continue paying rent. The three approaches to value are then reconciled, weighing the strengths and weaknesses of each approach to justify a final supportable value opinion.

Central considerations considered in an appraisal include the location (the office’s accessibility, visibility, and the immediate area), and the physical attributes (including the age of the office building, recent renovations, style of architecture, and services available). Also considered are the surrounding market conditions, including recent market trends, occupancy rates, and economic considerations. The appraisal is then finalized, which includes the appraiser’s conclusions and assessment, compiled into a complete report, which is typically a written document.

Class A Office

Class B Office

Class C Office

Bank Buildings

Institutional Uses

Medical Office

Retail Property Appraisal

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An appraisal of a retail building is a specialized, objective evaluation of its market value, executed by a trained appraiser using techniques like the Income Capitalization Approach, the Sales Comparison Approach, and the Cost Approach. This assessment is essential for lending purposes, investing decisions, tax considerations, and insurance, among other purposes. The appraiser looks at trends in the market, local and global economic factors, as well as conditions distinctive to the retail industry, such as the behavior of consumers to establish the property’s Value.

Appraisal approaches

Appraisers generally use two or three methods to value a retail property. These include:

Cost Approach: The appraiser estimates the reproduction or replacement cost new, then deducts the estimated depreciation, and finally adds the land value.

Sales Comparison Approach: The appraiser uses comparable retail buildings that have recently sold in the area to determine a price per unit (typically price per square foot) for the retail property being analyzed.

Income Capitalization Approach: The appraiser determines the property’s value based on the income-generating potential by looking at rental income. After deducting vacancy, collection loss, and expenses, the net operating income is divided by a market-derived capitalization rate for the retail property’s value by the Income Approach.

Factors considered

The appraiser analyzes both the physical real estate and the surrounding market in which it is located, including property features and attributes, locality and neighborhood statistics, current market developments and economic circumstances, and retail rents and income history.

Common uses

Appraisals are required for many intended uses, including:

Loans: Bankers, mortgage brokers, and hard money lenders need appraisals to decide if the value exceeds the loan amount.

Investing: Allows purchasers and/or sellers to establish a reasonable price for a purchase negotiation.

Tax Purposes: Used for real estate tax dispute.

Other intended uses: May be used for negotiating lease rates, making a claim against insurance, corporation merging, and legal disputes.

Shopping Malls

Community Shopping Centers

Strip Shopping centers

Big Box Retail

Restaurants

Automobile Repair Facilities

Industrial Appraisal

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Industrial property appraised include warehouse, flex space, distribution, cold storage, business park, and manufacturing facilities.

The appraisal of an industrial property is a qualified, professional evaluation of the fair market value of a real estate asset related to industrial use, including factory, storage warehouse, or manufacturing facility. The appraiser typically uses three methods, including the Cost Approach, the Sales Comparison Approach, and the Income Approach to evaluate aspects such as the industrial property’s physical condition, market area, market conditions, and income production. Appraisals are typically required for mortgages, acquisition/disposition, tax modification, and other monetary or legal decisions.

What is an Industrial Appraisal

An industrial appraisal is an unbiased, third-party evaluation of a property’s value in the open market, estimated by a professional who holds a state certification from the state in which the property being appraised is located. This can include a thorough and complete analysis involving a personal inspection of the real estate, the equipment, and the income potential it produces.

How an Industrial Appraisal is done (the three approaches)

In the Sales Comparison Approach, a comparison of the subject property is made to comparable industrial properties that have sold recently. In the Income Approach, the appraiser estimates the potential income the property is able to generate or is projected to generate. In the Cost Approach, the appraiser estimates the depreciated replacement cost of the property and its improvements to the underlying land value.

Why is an Industrial Appraisal needed

Industrial appraisals are used to estimate the property’s value, so the property can be used as collateral for a mortgage. They are used to establish a fair market value for negotiation between buyers and sellers. They help investors determine possible investment opportunities. Industrial appraisals are used for property tax adjustment, and they are also used to estimate values in estate settlement/planning, legal disagreements, and insurance claims.

Cold Storage

Manufacturing

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Flex Space

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Industrial Park

Distribution

Warehouse

Multifamily Appraisal

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Multifamily appraisals of garden and low-rise to high-rise apartments; duplex, triplex and four-plex dwellings; mobile home parks; and RV communities.

An appraisal of multifamily building constitutes a prescribed procedure of determining the fair market value of a property with several residential units. This includes using the three approaches including the Cost Approach, the Sales Comparison Approach, and the Income Approach. Each approach is used for evaluating property-specific attributes, and considers economic indicators, income derived from rent, and vacancy rates to estimate the multifamily property value.

Key components of a multifamily appraisal

The Cost Approach is used to estimate the value by estimating what it costs to reproduce or replace the building improvements, and then deducting the depreciation, and finally, adding in the land value. The Cost Approach is almost always used for newer properties and can also be used for older properties as well.

The Sales Comparison Approach is used to analyze similar multifamily properties that sold recently, located in similar areas, by making adjustments for differences in various elements, including number of units, size of the units, age/condition, location, quality, etc.

The Income Approach is used by the appraiser to estimate the value based on the income-producing potential. Factors such as rental rates, vacancy rates, and operating expenses are incorporated into the valuation to determine the net operating income (NOI). The NOI is then divided by a capitalization rate (also called cap rate), which is the expected rate of return on the property, to determine a final value indication.