Office Appraisal

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.