Practice Notes

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Approved for Publication 02.03.2005

COMMERCIAL PROPERTIES COMMITTEE

Practice Note 41

REVALUATION 2005

Valuation of Offices

1.0 INTRODUCTION

This Practice Note applies to the valuation of offices and premises which are, by reason of their situation and physical characteristics, similar to offices.

2.0 BASIS OF VALUATION

Offices are valued by application of the comparative principle using rates per square metre derived from local rental evidence.

3.0 RENTAL ANALYSIS

Rental analysis is undertaken in accordance with Basic Principles Committee Practice Note 1. Local rental evidence is used to determine rates applied and adjustments to value.

4.0 MEASUREMENT

Offices are generally measured on an internal basis in accordance with RICS Code of Measuring Practice Fifth Edition, to give the net lettable area.

4.1 The following areas are normally excluded from valuation -

Area which has headroom of less than 1.5 metres, (measured and stated separately but not included in valuation);

Entrance halls (other than those used as reception areas);

Stairs, stairwells and landing areas;

Plantrooms;

Toilets - generally not included, however see below;

Main corridor and passageways serving as access and egress to a floor or a building should generally not be included, however see below.

4.2 The following areas are normally included in the valuation -

Canteens - these are usually formed by the occupier, no allowance should be given as the landlord will have let the space as office accommodation;

Kitchens - in a modern office where a kitchen is formed by the occupier in space let to him by the landlord, no allowance should be given.

Toilets - where a toilet is formed by the occupier in space let to him by the landlord, no allowance should be given.

Main corridors and passageways - where these have been erected to sub-divide what has been let to the occupier by the landlord, no allowance should be given and the area included in the main office area.

Storage - where tenant/occupier decides to use an area for storage purposes which has been let as office space, then this should be included in the main office area.

Strongrooms/Safes/Stores - apply reduction factors depending on quality.

Banking Hall/Showroom - in some office developments ground floors are advertised for let with potential for Banking Hall/Showroom use. It is common in these cases that an enhancement over the ground floor office rental rate would be sought by the landlord. The rate to be applied should depend on the rental analysis of these subject type.

5.0 VALUATION

As noted above, the valuation of offices should be undertaken by the application of a rate per square metre applied to the net lettable area (or to the reduced floor area, if particular allowances are appropriate).

6.0 ADJUSTMENTS TO VALUE

In many cases office buildings will be occupied over more than one floor. Floor relationships derived from local rental evidence should be applied to the net lettable area on each floor (or part of a floor) to arrive at a reduced floor area. The prime determining factor of the relativities between floors (or parts of floors) is often whether there is the provision of a passenger lift.

6.1 Additions/Deductions to Value

The following may be either additions or deductions depending on the standard reflected in the typical office of the class to be valued. Additions and deductions are based on local rental evidence and would only be applied where rental analysis indicates a material effect on the value of the particular subject when compared to the typical standard for that class of office.

Heating
Air Conditioning/Air Handling
Sprinklers
CCTV cameras and monitors

6.2 Car Parking

Where car parking spaces, either under cover or in the open, are to be valued with an office, apply an appropriate rate per car space derived from local evidence.

7.0 QUANTUM/INVERSE QUANTUM

An adjustment may be made where an office is larger or smaller than the standard for that class.

In the office market landlords may obtain a lower rate per square metre for larger offices, a higher rate on smaller offices is also possible.

Quantum/inverse quantum adjustments should be based on local evidence.

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