Valuation Report: Liverpool Office Building Rental and Market Analysis

This report provides a comprehensive valuation of a Liverpool office building, addressing key aspects of commercial property analysis. The report begins by identifying a specific office building in Liverpool, detailing its characteristics such as floor area, location, and building specifications. It then calculates the estimated rental value, all risks market yield, and market value, providing a clear explanation of the methodologies used. Furthermore, the report identifies the rateable value of the building and estimates the rates payable, including Small Business Rate Relief (SBRR) for the years 2017/18, 2018/19, and 2019/20. The analysis includes relevant calculations and interpretations, offering insights into the property's financial performance. Finally, the report incorporates a hypothetical scenario to assess the property's value under specific conditions. The document is contributed by a student to be published on the website Desklib, a platform which provides all the necessary AI based study tools for students.

UNITED KINGDOM REAL
ESTATE

TABLE OF CONTENT
a) Identify office building in Liverpool, Leeds, Manchester or Birmingham having a floor
area of 1000 sqm- 6000 sqm.
b) Describe the property and all its characteristics such as a floor area of premises, location,
description and building specifications.
c) Calculate Estimated rental value for building and all risks market yield showing market
value and ARY
d) Identify rateable value of building and estimate the rates payable including SBRR in
2019/19 and 2019/20.
e) Prepare a valuation report for freehold interest in the property
1) Calculate the market value of freehold interest for loan
2) Calculate discounted cash flow and NPV
REFERENCES
Figure 1 Location.......................................................................................................................3
Figure 2 Office in Liverpool......................................................................................................4
Figure 3 Office in Liverpool......................................................................................................4

a) Identify office building in Liverpool, Leeds, Manchester or Birmingham having a floor
area of 1000 sqm- 6000 sqm.
Office space in Liverpool
Area- 3493 sqft
Address- 5 St. Pauls Square - Unit 3, Liverpool, L3 9SJ
Figure 1 Location
(Source: Office space in Liverpool, 2018)
3

Figure 2 Office in Liverpool
(Source: Office space in Liverpool, 2018)
Figure 3 Office in Liverpool
(Source: Office space in Liverpool, 2018)
Street View on Google Map
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https://www.google.com/maps/@53.4099998,-2.9936707,3a,90y,101.26h,80.9t/data=!3m6!
1e1!3m4!1sTLh-Jn-guQB3Ez4jczpUgQ!2e0!7i13312!8i6656
b) Describe the property and all its characteristics such as a floor area of premises, location,
description and building specifications.
Office space in Liverpool- St Paul’s square is a commercial business park famous for its
prime location which gives lavish experience to a user whoever take this property on rent on
the lease will enjoy all the benefits associated with it (Mulliner and Kirsten, 2017). This street
is suitable for various kinds of businesses such as retail owners, entertainment and office
purpose as this place is surrounded by some of the costa coffee which is a famous coffee shop
selling quality-oriented coffee all throughout the world famous market players located in this
location are Sainsbury and Tesco express which is enough to show the worth of this place to
book the property to increase the goodwill of a user as well as the business which will get
started in the property (Dratler Jr and McJohn, 2018). The business of a user will get
promoted due to the host district as Liverpool is regarded as a business district of the United
Kingdom which invites a lot of people for trading purposes every year which is a reason
behind the increasing rating of this district. Just like London as a heart of United Kingdome
similarly, this street is a heart of Liverpool (Cohen and Brown, 2017).
Basic amenities offer by this place consisting of a top view of the St Paul Street to
help all its users (Duffy, Cave and Worthington eds., 2016). The main entrance is there in the
building of the Paul Street which offers office space with grade a quality. 24 hours’ security
is there in the entire building by appointing security guards and placing CCTV cameras. 3
Car parking spaces are offered by an owner to all the occupants.
Compulsory services lies in this commercial building offered by this place such as Air
conditioning, electricity, water services, and lift with a security guard, car parking but gas
supply is not there in this place especially on the basement and the ground floors (Dratler Jr
and McJohn, 2018). This will act as a negative point for a business user who intends to use
this place for starting its office who will find it difficulting in giving refreshments to all its
employees when there is no gas supply at the premises which will force a person to
reconsider this investment and search for another one (Thompson, 2017).
The terms and the conditions of the owner for giving this property on lease on a
condition that a user should take this property for a term of 15 years without breaching the
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same before the expiry of the total term period or at the completion of 10 years out of the
total 15 years (Bichard, 2016).
The area of the basement and the ground floor area 757 sqft of the basement and 457 sqft of
the ground floor which will totally give to a seller of 1214 sqft of these two floors and rest
area for other floors to meet all the requirements of the occupant.
A large number of windows are enough to show the airy space of the property which
will enhance the living experience of a person who uses this space for starting their offices
(Stott and Warren, 2018). A space for opening an office should be fully ventilated; airy,
giving a view of the street and entering sunlight through the window to the entire office will
enhance the working productivity of all the individuals working there. The current property
fulfils all the requirements of a user. This place is centrally located in the city that will arouse
the interest of all the clients to visit this place due to the aesthetic beauty of the street which,
in turn, proves successful for business in increasing its business (Sigmundsson and et.al.
2017, April).
A tenant will firstly look for various things which they will consider before purchasing any
property on lease or on rental purpose whichever fulfils all its requirements. Rent of this
property is 13.5 pound per Sqft along with the application fee to be payable by an occupant at
the time of the purchase of the property (Kent, Bhattacharjee, Hussein and Jah, 2017). The
application fee is required to fulfil all the documentary regulations of this property as the
motive of an entity is to cross-check the authenticity of an occupant as the owner of the
property does not want to be in a trouble by giving its property to a stranger without knowing
about their background and the information.
A facility offered by an owner with this property includes extensive car parking,
surrounding landscapes, front street view through window, extra amenity space. It is a
renowned commercial space which meets all the requirements of as user who wish to start its
business as they can get an immense space to occupy all its employees in operating its
business as their employees will get motivated as its employer will offer them a comfortable
working space which will fulfils all their needs such as social needs, monetary ad non-
momentary needs as they get fresh air while working which increases their productivity
(Atkins, 2017).
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It is a renowned street especially marked for all the commercial offices as famous
offices are found in this area which will give a new opportunity for an individual who intends
to start its business as they will get to increase its existing business connections by daily
meeting with several entrepreneurs surrounded by this place (Taylor, Cooper and Barnwell,
2015).
The specifications of this property consists of several things such as Air conditioning
on all the floors, suspended ceilings on all the floors of this building, 24/7 lighting, open
offices, Lift occupies eight personas altogether, complying the standards if DDA and secured
car parking (Connolly and Wall, 2016).
 Facilities given by the owner to its tenant or occupant of this property are mention as
below:
 Easily accessing all the floors without any restriction
 Large number of car space in the porch
 Increasing number of landscape
 Tight security of the building which avoids trespassers
 Recreational services such as gym, café, cycling equipped in the premises
While talking about the location of this place, it is situated 4 Km away from
Southwest of the Liverpool city which is such a short distance which can be travelled by
anyone and 10 minutes’ drive rom city centre. It is close to east of a famous Road as a
person will reach this road in just 2 minutes along with a similar distance to the bus stops
(Ward and Cook, 2017).
c) Calculate Estimated rental value for building and all risks market yield showing market
value and ARY
Rental value Estimate
= Property price/annual rent
Particulars Office space in Liverpool
Property Price £976642.8
Annual rent = £23.30*3493
= $81386.9
Rental value =£976642.8/$81386.9
= £12
Area 3493
Annual rent = £12*3493
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= £41916
It is essential to determine the estimated rental value of a particular property before taking a
final investment decision as this value will directly affect the entire return generated from an
investment. By knowing the estimated rental value, a user will be able to compare the
existing rent with the estimated rental to know that the price charged by an owner is
reasonable or not (Valuations of property, 2018). This will help a user in considering the best
suitable investments out of two or more choices of investments.
All risks yield
This approach uses by an estimator in knowing the worth of the commercial property
by considering the likelihood of the occurrence of the risks in the near future by taking into
account all the elements and the characteristics. An investor always interested in knowing
about all kinds of risks associated with the investment property before making any
investment (Łowicki and Piotrowska, 2015). Various principles are to be used while
calculating all yields risks are mention as below:
The yield will get increases due to a decrease in the capital value of the property
The decrease in the yield of the market occurred due to an increasing amount of rents along
with the decrease in the capital value of the property.
Capital Value= (Annual rental income/Yield)*100
Yield = (Annual rent-Operational costs)/Property Value
Particulars Office space in Liverpool
Annual rent = £23.30*3493
= £81386.9
Operational costs £976642.8*1%(Brokerage Fee)
= £9766.428
Property value £976642.8
Yield = (£81386.9-£9766.428)/ £976642.8*100
= 7.33%
Annual rental income = £12*3493
= £41916
Capital value = £41916/7.33%
= £571841.74
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Interpretations
The yield or returns generated from all these three investments property is 7.33% for
office space in Liverpool. An investor’s first choice for choosing the property will be
Liverpool as the yield percentage is higher which, in turn, will increase their returns in the
future (Crosby and Henneberry, 2016). In terms of the capital value that is the market value
of the property, Liverpool leads the remaining two commercial properties which are less than
the worth of the property located in Liverpool. The increase in the market value of the
property is due to various factors such as the aesthetic beauty of the city, Business Street, the
reputation of the place, increasing awareness of the business (Bond and Brown, 2017).
The market value of the property is essential to know as an investor is interested in
knowing the future value of the property in which he is interested in purchasing the same
either on rent or on a lease (Munshifwa and et.al., 2016).
d) Identify rateable value of building and estimate the rates payable including SBRR in
2019/19 and 2019/20.
Particulars Leeds
Rateable value of building £41916
Multiplier
2017/18 46.6P
2018/19 48.P
2019/20 50.3P
Business rates
Rateable value*multiplier
2017/18 £41916*46.6
= £1953285.6
2018/19 £41916*48.0
= £2011968
2019/20 £41916*50.3
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= £2108374.8
Relief
2017/18 £41916* 12.5%
= £5239.5
2018/19 £41916* 17.5%
= £7335.3
2019/20 £41916* 20%
= £8383.2
Business rates
2017/18 £1953285.6-£5239.5
= £1948046.1
2018/19 £2011968- £7335.3
= £2004632.7
2019/20 £2108374.8- £8383.2
= £2099991.6
The rateable value of all these three properties is the annual rent calculated by multiplying the
area of the property with the rental value of the three commercial properties located in
Liverpool.
Small business relief is applicable on all these properties as this falls under the medium
category of the relief under which the different percentage if the rateable value is deducted
from the calculated business rates in a range of £20000-£99000 of rateable value (Business
rates, 2018).
Annual rateable value
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It is an annual value of the property decided by the city council of the United
Kingdom to help all the users to meet all its taxable obligations associated with all the
properties listed under different city council. The rateable value of all the properties will
differ from one property to another which is estimated by valuation office agency which will
assessed the existing annual rent payable by an occupant for purchasing the property either
using lease agreement or taking the same on rent. The supervision of this rateable value of the
property will be headed by HM revenue and customs officer whose aim is to fulfil all its aims
and the objectives.
The rateable value of the property shows the market value of the entire property
which is a fixed value determines by the authority for estimating the tax liability incurred on
the property (Loan security valuation, 2016). The valuation officer is interested in knowing
the latest value of the commercial property by considering all the changes takes places in the
same.
e) Prepare a valuation report for freehold interest in the property
Property area description
Parking space 124 Sqft
Pantry 50 sqft
Office space 1600sqft
Lobby 100 sqft
Reception area 40 sqft
Consistency approach- The valuation of the property should be consistent enough as the
same method should be followed in estimating the worth of a freehold property by
considering its tenure (RICS Valuation standards. 2018).
Credible valuations- An adequate qualification of the value is taken into account to
determine the valuations. The credibility of an individual is on sake when the wrong value is
estimated.
In estimating the valuation report of the property, it is essential to consider each and every
aspect with proper care such as standards required to comply by an individual before
investing any property otherwise a person will trouble itself with a higher problem of not
complying with all the standards. RICS standards emphasize on the quality and the scope of
investment made by a user in residential or commercial spaces in Liverpool for which they
have to follow the local city council regulations of the Liverpool.
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1) Calculate the market value of freehold interest for loan
= Estimated Rental value
= £12
= £12*15%
= £12+£1.8
= £13.8
= £13.8*12*1200
= £198720- £13.8*3*1200
= £198720-£49680
= £149040
2) Calculate discounted cash flow and NPV
Year Cash flow Discounting rate 9%
0 198720
1 10000 0.917431 9174.312
2 15000 0.84168 12625.2
3 16000 0.772183 12354.94
4 20000 0.708425 14168.5
5 25000 0.649931 16248.28
6 30000 0.596267 17888.02
7 35000 0.547034 19146.2
8 40000 0.501866 20074.65
9 45000 0.460428 20719.25
10 50000 0.422411 21120.54
Discounted cash flow 163519.9
NPV
Present value of cash flow 163519.9
Less Initial investment 198720
NPV -35200.1
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REFERENCES
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Munshifwa, E. K., and et.al., 2016. Variances in rateable values in rating practice in Zambia:
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