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BUILDING DEPRECIATION AND PROPERTY APPRAISAL TECHNIQUES

Journal of Valuation

ISSN: 0263-7480

Article publication date: 1 February 1987

431

Abstract

The impact of accelerating technological change in recent years has been to shorten the useful lifespan of many commercial buildings. Shorter income flows and increasing yields have resulted in a rapid descent towards site values. The response to changing investment circumstances such as this will first be reflected in the subjective investment appraisal, which will precede changes in reactive market valuation methodology. This paper presents and compares three alternative methods of appraisal which might allow explicit analysis of building depreciation. Treating the building element of property as a wasting asset akin to a leasehold is rejected for its simplistic assumptions and lack of flexibility. A cost based approach is similarly flawed. The recommended approach is an explicit cash flow projection which reflects the fact that rental growth will decline over a holding period, considering alternative resale prices based upon site value, value for refurbishment, or value if re‐let unimproved.

Keywords

Citation

SALWAY, F. (1987), "BUILDING DEPRECIATION AND PROPERTY APPRAISAL TECHNIQUES", Journal of Valuation, Vol. 5 No. 2, pp. 118-124. https://doi.org/10.1108/eb008006

Publisher

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MCB UP Ltd

Copyright © 1987, MCB UP Limited

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