The most common question I receive is “What is my building worth?” Owners expect a quick and precise answer. While it may be easy to provide a response based upon recent comparable sales, the correct answer is: “It depends”.
The fundamental principle of valuation is: “highest and best use is that use which is permitted, legal and for which there is demand.” In order to understand a building’s value, it takes time and analysis to determine what is permitted, what will be permitted in the future and what is legal for which there is active demand.
In many cities, the municipal codes and the general plans are out of date relative to contemporary uses. For example, there are no zoning codes for data centers or EV charging stations. There is often no category for co-working or medical type of uses such as urgent care or ambulance dispatch centers. There are codes which allow for permissible uses which include horses and agricultural uses but technological widgets for self driving cars is something planners had never imagined.
Navigating through the zoning code and prospective changes are essential to determine a property’s highest and best use. Knowing what is happening in the area that creates demand drivers is also important to determining proper valuation. If the code permits but there is no demand then we need to look realistically at what type of buyers might be in the market based upon changing needs in the region.
Every property is unique and a full understanding of the features which are specific to the subject property will help in the final valuation using cost, sales comparison or income approaches which are standardized methods of valuation used by appraisers and brokers alike. A broker’s pricing opinion is however not an appraisal. It is precisely an opinion based upon market facts.
Apex believes that proper valuation techniques result in realistic pricing which leads to successful disposition at the highest price possible to the buyer ready willing and able in the shortest period of time. Ultimately there are many variables, including interest rates, competitors and new demand drivers in the area. Ultimately, the market will provide feedback and it is up to us, working in partnership with owners to set pricing will ultimately attract the right buyer for successful disposition within a reasonable period of time.
Apex is focused on helping private owners, investors and mid-market firms to succeed in their commercial/industrial real estate objectives.
