Journal of Property Valuation and Investment
Added on 2021-06-16
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PROPERTY VALUATIONEXECUTIVE SUMMARYThis valuation report provides a valuation of the subject commercial property usingthree different methods of valuation, namely (1) Direct Comparison; (2) Capitalization;(3) Summation. The subject property is 181, Enmore Road, Enmore NSW 2042.Analyses of the subject property with three other properties located on the same retailstrip has been carried on the basis of information collected from RP Data, Local Councilwebsite and various Real Estate Agents dealing with commercial properties in sameretail strip. Valuation using the above described valuation methods has been done inaccordance with the prescribed course.INTRODUCTIONFor the purpose of preparing this report on property valuation, I have selectedENMORE ROAD NSW 2042 as the retail strip and the subject property is 181 EnmoreRoad, Enmore NSW 2042. This strip is located in the Enmore Suburb of New SouthWales province, say Barnes & Doidge, (2010). It has more than 200 retail outlets ofdifferent sizes, dealing in different commodities and catering to the needs of nearly3,880 residents of the suburb. I conducted a survey of this retail strip and noted therecent trend in sales as well lease of the retail properties for the last five years (Refer toTable-1 and 2). Local Economy and Retail PropertiesIn its latest national survey report, savills.com.au/research (Refer to Figure-1 & 2 inAppendix), an authority on economic and property related research in Australia, hasstated that the investment surge in November and December 2017, mostly in New SouthWales, has indicated the total value of investment transactions ($5m+) which weresigned in the year 2017 have reached the 10-year high at $9.17 billion, which is 23% upon the 2016 figures and is well above the national 10-year average of $5.7 billion, as perGruis & Nieboer (ed), (2013). Because of weaker employment conditions, markets haveremained sluggish in 2017, but from November 2017 there has been a surge inemployment rate and retail property segments are on the rise, explains Marsden, (2011).
The New South Wales retail property market segment is projected to grow stronglyduring 2018, and this is driven mainly by a wave of the new Large FormatNeighbourhood Centres. This is in contrast to the Regional development activitieswhich have been dominated by extension projects as investors have been repositioningassets over medium-term investments, says Parker, (2012).VALUATION ANALYSIS – NSW RETAIL MARKETS An analysis of last five years to find relative market trends on the Enmore Road retailstrip has helped in the market valuation of 181 Enmore Road, Enmore NSW 2042. Gross Rent per Square Meter The analyses of the Enmore Road retail strip has shown mixed results, especially whendiscussed relatively to the location of the subject four properties and the gross rent persquare meter being charged by the owners (Refer to Table-2). I could reliably comparethe subject property’s location with that of Shop 3/80 Enmore Road, Newtown,according to Emerald Gems (ed), (2015). The average lease rent per square meter onEnmore Road is $547.81/m² (Refer to Table-2). Comparable lease rentals (Refer toGraph – 1 & 2 in Appendix) for the last five years have shown that the lease rentalshave shown an upward trend compared to the lease rental/m² of 181 Enmore Road,Enmore, as per Mena, (2011).Retail Location Strip – Enmore Road Vacancies Since the Global Financial Crisis of 2008, there has been an increase in the number ofvacancies on Enmore Road. This trend of vacancies has been steadily declining in thepast five years due to the surge in NSW’s economy, assert Kaganova & McKellar (ed),(2006). The areas surrounding the subject property currently have few vacant retaillocations (Refer to Table-2) and this can be because of any one of the following – Rents are high in the specific location.Limited parking space in the area is decreasing the visitor’s interest in this area. I believe that this is among the best locations of Enmore but too high rents may beslowing down market activity. The properties which are vacant currently in this areahave been shown in Table-2 (Refer to Graph – 3 & 4 in Appendix). Retail Location Strip – Enmore Road Sales Evidence
Recent sales in the Enmore Road retail strip have been analyzed (Refer to Table-1) andthe averages for sale price and the cost per square meter has been determined for thebuilding area, as detailed by Mathew (ed) et al, (2012). My analysis was limited to thosesegments of the retail properties situated along the Enmore Road strip or were in thenearby areas and were found to be relevant to the subject matter of this report. The average yield obtained in this segment of the Enmore Road retail strip helps inworking out the yield for the subject property. As shown in Table-1, the average saleprice of the retail properties analyzed works out to be $1,557,248. The average buildingarea is determined as 155 square meter and the building area cost per square meter isdetermined as $10,808. The area between 181 and 121 Enmore Road has beenconsidered as the most relevant immediate area around the subject property (181Enmore Road, Enmore), assert Spoehr (ed), (2009). DISCUSSION AND ANALYSIS OF VALUATION METHODS I have found that the following three valuation methods are the most relevant methodswhich can be used in this report for the purpose of valuation of the subject property (181Enmore Road, Enmore NSW 2042) and these have been discussed and compared in thefollowing pages of this report, say Wells (ed), (2013). (1)Direct Comparison Method(2)Capitalization Method(3)Summation Method1.Direct Comparison MethodIn this method, the process used includes making a comparison of the attributes of theproperties within the area, against the subject property to be valued. Only thoseproperties have been considered for the analysis which were sold during the last fiveyears, as per Setten, (2009). In the Direct Comparison method, such properties aretermed as comparable properties. I have conducted a thorough research about thecomparable properties on their recent sales and finally compared and analyzed the datawith that of the subject property, explains Cartwright, (2012). In this method, thepurpose of the data collected about the comparable properties is to act as a valuation
guide which can be used so that the valuation expert can make a comparison by makingany required adjustments for differences found in the data between the comparableproperties, asserts Haidar, (2012). The attributes which I found reasonable for makingthe comparison included the Inherent Features and External Features. Inherent Features of the PropertyType of improvementsStreet frontage sizeBuilding area (or NLA)Size, slope and shape of the land andThe properties aspect. External Features of the Property SurroundsProximity to amenitiesLocal council issues andParking. A Direct Comparison, as per Emerald Gems (ed), (2015), is then carried out of theproperties considered for comparative analysis and the attributes to be taken intoconsideration include their – (a)Rental Valuation – This is done after comparing the rents being charged, rentalcharge per square meter and(b)Yield. Finally, a discussion is carried as to why these attributes of the rents per square metre and yields have been found to be either similar, different or invaluable. Strengths of Direct Comparison MethodIt is easier to make comparison through sales as each property has been evaluated using the common denominator of sales price per square meter of the building area as the comparing yardstick, assert Barnes & Doidge, (2010).Direct comparison method can clearly point towards the trends within the area connected with the retail strip. These trends are based on calculations done from the available data and are supported by evidence, as per Barnes & Doidge, (2010).The denominator of rate per square meter is an universally accepted measure andis applicable to all sizes of the properties, assert Barnes & Doidge, (2010).
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