Report of the Financial Stability Forum

Running head: VALUATION FOR BRIDGEFORD STREET ENTERPRISES LTD 1
Valuation for Bridgeford Street Enterprises Ltd.
Student’s Name
Institutional Affiliation

VALUATION FOR BRIDGEFORD STREET ENTERPRISES LTD 2
Introduction
The office is situated in Manchester City. The property in which the office is located at
Bridgeford Street in Manchester City. The primary purpose of the valuation of this property is to
establish the market value of the property they propose to purchase to occupy for the business.
The office is situated in a large complex which contains five other similar offices. All the
partition categories of this building are identical in size and design. For example, all offices have
similar dimensions and plans. The building contains twelve offices, eight visitor rooms, five
executive rooms, and four rooms set for operations and maintenance.
The valuation method I would utilize in valuing the building is the sales approach. This
method is also referred to as the market approach. It relies heavily on the most updated sales data
from the comparable properties, for example, other office buildings within the Manchester City.
Bridgeford Street Enterprises Ltd would ascertain the fair market value of the premises situated
within the city to know the estimated market value of the entire building and not just an office.
The method is applicable because it does not have multiple drawbacks, unlike other methods.
The Factors Affecting the All Risk Yields and Market Rents for this Property
The All Risk Yield is a metric used to evaluate the capital value of an investment. It
comprises both net and gross yields. It is utilized when determining the probable risks of an
investment. The metric is also used to assess the market value of a property. ARY is computed
by dividing annual rental income by the value of the property and multiply the results by 100%
(Shapiro, Mackmin & Sams, 2019).
Demographics
Demographics refers to the composition of the population, such as gender, income, age,
race population growth as well as patterns of migration (Shapiro, Mackmin & Sams, 2019).

VALUATION FOR BRIDGEFORD STREET ENTERPRISES LTD 3
These factors are vital when it comes to the determination of real estate or property. Significant
shifts in the demographic status of a country have a massive impact on the trend in the value of
the property located within a specific area.
Therefore, the market rent for the property would be affected by various factors affecting
the demand for properties in Manchester City. In the recent period, there has been a massive
influx of small and medium scale investors in the city. This situation has resulted in rising in
demand for properties, leading to an upward shift in prices. Therefore, the market prices for the
rental offices current is almost double the amount that was charged ten years ago. If demand
continues to rise, the price would probably rice higher in the future.
Interest Rate
The interest rates usually have a high impact on the value of the property. If Bridgeford
Street in Manchester wants to utilize a mortgage to purchase the office, it has to consider the cost
of the loan. The cost of the loan is highly dependent on the interest rate. If the interest rate is low,
then the cost of borrowing is small. A mortgage with a low price is desired because the firm
would service it quickly (Shapiro, Mackmin & Sams, 2019). However, the loan with a high-
interest rate is expensive. Therefore, the firm has to inquire about the current interest rates so that
it can come up with an informed decision on how to service the loan. Also, in case the cost of
building the complex was high because of high bank rates, the rental rates are likely to be
elevated to cover these costs.
The Economy
The overall health of the economy affects the value of a property to a great extent. This
factor can be measured using economic indicators like the gross domestic income of a country,
unemployment report, price of commodities, and the current manufacturing activities. Even

VALUATION FOR BRIDGEFORD STREET ENTERPRISES LTD 4
though offices are not affected by the economic downturn because of the longer term of the
lease, purchasing a full building would be primarily affected by the financial status of the
country.
Government Policy or Subsidies
Government policies have a sizeable impact on property prices. Government with good
policies like tax credits, grants, and deductions can temporarily impact the value of the property
positively. The company would pay less to acquire the property if the government subsidies the
construction of such premises (Shapiro, Mackmin & Sams, 2019). Also, grants boost real estate
companies to construct more houses. The increase in the supply of buildings leads to a reduction
in demand, resulting in lower prices. Therefore, government policies would principally
determine the market value of the buildings situated in Manchester City.
The Uncertainty Associated With My Valuation
The market approach has various downsides or difficulties, just like any other approach.
Sometimes even though there are known and recent transactions in the market, the properties
may not be identical to the current building. Probably, the other transactions involved buildings
of different sizes, shapes, or different locations, which are valued based on land prices and cost
of construction in such areas. One may not be sure whether he would get a completely identical
property sold in the recent period to compare with. This situation makes the market approach
method complex.
In addition, the method can lead to a significantly large error in the amount of the value
of the object. The fact is that assessing the building's market value at the end of the forecast
period is much more difficult than assessing its building at the date of the assessment, since there
is no reliable basis for this. Therefore, the forecast of the reverse value of the object is very