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Valuing Commercial Properties in a Volatile Market

The commercial property market has faced significant upheaval and uncertainty over the past few years. Valuers need to adapt their methodology and data sources to accurately value retail, office, industrial and other commercial assets in this new environment.

The Pandemic Caused Major Disruptions

The COVID-19 pandemic triggered seismic shifts for commercial real estate. Office vacancy spiked with remote work while retail suffered reduced foot traffic. Industrial proved resilient as ecommerce surged. These uneven impacts make benchmarking difficult.

Valuers need granular data on sub-categories within each sector. For example, suburban neighbourhood retail proved more stable than CBD luxury stores. Industrial warehouses outperformed offices.

The Economy is Causing Ongoing Volatility

Even as pandemic impacts fade, economic factors like inflation, rising interest rates, recession risks, and geopolitical tensions are creating an unpredictable outlook.

Valuers should emphasise recency of comparable sales. Rents and yields should be forecast through sensitivity testing and scenario analysis given shifting macro conditions.

Buyer Profile and Investment Style Matters More

In volatile times, the buyer’s investment strategy influences value more than broader market sentiment.

Core institutional investors prioritise stability and will pay a premium. But opportunistic investors want higher returns given perceived risk. Know your buyer and their strategy.

Specialized Data Sources are Essential

Publicly available data lags too much. Valuers need access to quality proprietary data through subscriptions or partnerships.

Key data includes lease comparables, construction cost indices, granular demand and supply metrics, and real-time capital markets activity across asset classes.

By adapting methodology, emphasising recency and granularity of data, and understanding buyer motivations, valuers can accurately advise clients even in fluid, unpredictable commercial markets.