Practice Notes

Approved for Publication 14.07.2004 (C)

INDUSTRIAL COMMITTEE

Practice Note 1

REVALUATION 2005

Comparative Principle

1.0 INTRODUCTION

This practice note applies to the valuation of factory, warehouse and workshop style properties valued on the comparative principle.

2.0 BASIS OF VALUATION

The basis of valuation is the comparative principle based on a consideration of local rental evidence. As with all applications of the comparative principle, the most relevant evidence will be found locally and Assessors having a body of rental evidence in their own areas are entirely free to adopt their own approach. In establishing local schemes of valuation, the general guidance contained in the following paragraphs may offer assistance and can be adopted in part or in whole at the Assessor's discretion.

2.1 Specification

Properties should be compared initially with a building matching the following specification.

A modern single storey unit with steel or concrete frame, walls of modern insulated cladding or masonry equivalent, insulated roof and granolithic or power-floated load bearing floor. The eaves height will be in the range of 3.80 - 4.60 m. There will be average quality heating and lighting of a standard permitting conventional factory work. Access and circulation space will vary depending on the type of property. Any addition or deduction will depend on local rental comparisons.

3.0 VARIATIONS TO SPECIFICATION

3.1 General

Where possible, variations to the standard specification should be reflected in the valuation in accordance with local rental evidence. However, the Industrial Committee recommends the following adjustments where there is no conclusive evidence to the contrary.

3.2 Structure

3.2.1 Floors

3.2.1.1 Floor construction

3.2.1.2 Floor finish

3.2.2 Walls

3.2.2.1 Wall construction

3.2.2.2 Wall finish

3.2

3.2.3.1 Roof construction

3.2.4 Wall-head height

The following table provides a range of height adjustments that may be used where rental analysis is based on a norm wall-head height of 3.80 - 4.60 m. Where other wall-head heights represent the norm in a particular valuation area, then the percentage relationships should be adjusted accordingly.

3.3 Services

3.3.1 General

All items of service plant, named under Class 2 of the Valuation for Rating (Plant and Machinery) (Scotland) Regulations 2000 (as amended), should remain in valuation unless the valuer is clearly satisfied that the proviso in the Regulations relating to items of plant or machinery “……used or intended to be used in connection with services mainly or exclusively as part of manufacturing operations or trade processes” applies. Care should be taken not to exclude from value any items of plant under the Class 2 proviso that may still be rateable elsewhere in terms of Classes 1, 3 or 4.

Careful consideration must be given before removing any service plant or machinery from value which it is claimed was installed only as a process requirement. It is suggested that where the main or exclusive use of an item of service plant cannot be identified as being used as part of manufacturing operations or trade processes, then the item should be regarded as rateable under Class 2. In the case of multi-purpose service plant, the functions of the plant should be individually considered. For example, in the case of an air-conditioning system which provides amongst other things, heating, the use of the heating needs to be identified and unless the heating is used mainly as part of manufacturing operations or trade processes then an element in respect of heating should be retained in value. For assistance in this matter reference should be made to the SAA paper “Interpretation Guidance: Class 2 Table 2(b) The Valuation for Rating (Plant and Machinery) (Scotland) Regulations 2000”.

3.3.2 Heating

The basic rate assumes adequate heating. A deduction of 5.00% should be made if there is poor heating and 10.00% where heating is absent. Where the heating is considered to be excellent an addition of 2.50% should be made. Further additions may be made for specialised installations. Refer also to paragraph 3.3.1.

3.3.3 Lighting

The basic rate assumes adequate lighting. A deduction of 5.00% should be made in buildings without lighting and 2.50% where the only lighting is from isolated pendants. An addition of 2.50% should be made for excellent lighting. Further additions may be made for specialised installations. Refer also to paragraph 3.3.1.

3.3.4 Air Conditioning

The basic rate includes adequate heating. Where items of plant and machinery contributing to air conditioning are also present then additions may be made from the following table. Refer also to paragraph 3.3.1.

3.3.5 Sprinklers

The following addition is recommended but should be considered in the light of information contained in the SAA/VOA Rating Cost Guide. Refer also to paragraph 3.3.1.

3.4 Superior construction

Valuers should be aware that there are now many developments where light manufacturing use takes place, which are of superior quality to the specification envisaged by this practice note. Many of these are located in dedicated science and business parks, frequently with planning consent for Class 4 use. Class 4 use was redefined in The Town & Country Planning (Use Classes) (Scotland) Order 1989 as…. “a use which can be carried on in any residential area without detriment to amenity”. Many of these subjects resemble offices in character and appearance. It is recommended that such subjects are not valued in accordance with general industrial evidence but in line with their particular rental profile which will frequently align more with commercial offices.

3.5 Offices

It is not possible to provide a single recommendation on valuation treatment, which will depend on local evidence and analysis method. Valuers should be aware however that the basic level for offices derived from any rental analysis is likely only to reflect the quality of office accommodation associated with typical letting units. Many subjects, particularly those erected for owner occupation and used as corporate headquarters, may have considerably higher standards of finish, which should be reflected in valuation.

3.6 Ancillary accommodation

The following approach is recommended for the treatment of minor buildings and elements frequently associated with industrial subjects.

4.0 MULTI -STOREY BUILDINGS

The following tables of adjustments provide guidance where there is no conclusive local evidence. The allowances are not suitable for business centres or Class 4 style developments where an office approach may be more appropriate or in the case of industrial subjects with vertical process systems where allowances may be abated or withheld or a cost basis considered.

4.1 Production/Warehouse space

4.2 Offices

The percentage selected from any range will be dependent on the quality of access.

4.3 Basements, galleries, attics and lofts

This type of accommodation varies widely in quality, character and purpose and no general recommendations can be made. However, the final rate selected should be sensibly related to the principal floor served.

5.0 AGE & OBSOLESCENCE

The following scale of allowances is provided as an indication of the reductions which may be appropriate for particular years of construction and is based on the SAA / VOA table of allowances for Contractor's Basis subjects.

It should not be slavishly followed and where possible, valuers should be guided by local evidence. Allowances should be restricted or even completely withheld in the case of refurbished buildings depending on the degree of improvement. Allowances of greater than 50.00% should only be made in exceptional circumstances, as it is reasonable to assume that buildings built earlier than 1950 will have been subject to some degree of upgrading.

6.0 DISABILITIES

The following table suggests a range of appropriate allowances for the most commonly found drawbacks to the occupation of industrial subjects. The list is not exhaustive but care should be taken to ensure that aggregated allowances are not excessive.

It is recommended that the total of allowances for Age & Obsolescence in terms of paragraph 5, and for Disabilities in terms of this paragraph, should not exceed 80.00% for any building still capable of reasonably economic use.

7.0 QUANTUM

7.1 Introduction

Adjustments to final values for the impact of size on rental levels have traditionally been a feature of previous schemes for the valuation of industrial subjects. Variations in local demand and the differing character of industrial estates make a single national scale of allowances difficult to establish and it is therefore recommended that local evidence, where available, should be used to determine any adjustment.

7.2 Conventional units

Where no evidence exists, the following scale may be of assistance and should be applied with interpolation as necessary. The scale is based on a 500 - 700 m² norm and will require to be reconsidered if differing norm ranges are adopted in particular valuation areas. No recommendation is provided for units less than the norm range as value levels will invariably depend on local evidence.