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Sale Conditions Impact Office Building Prices: The Appraisal Journal

December 20, 2016 08:00 AM

CHICAGO (Dec. 20, 2016) – The context and conditions of sale transactions can impact office buildings’ sale prices, according to an article published this week in The Appraisal Journal.

The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.

“The Effects of Conditions and Context on Office Building Sales, 2002–2011,” by Spenser J. Robinson, DBA, and Andrew R. Sanderford, Ph.D., examines understudied elements of office building transactions over a 10-year period and their impacts on prices in the 50 largest metro areas of the United States. Several factors, including IRS Section 1031 exchanges, REO sales, high vacancy, tenant purchase and historical uses impacted sale prices to a similar degree across all the metro areas studied.

Other factors – such as of land contracts, option sales, contamination, deed restrictions and ground leases – affected sale prices, but the level of impact was unique to the particular market and could not be generalized. The analysis fills a void in appraisal-related literature around these types of elements and comparisons. 

Read “The Effects of Conditions and Context on Office Building Sales, 2002–2011” in the Fall issue of The Appraisal Journal.

Also in The Appraisal Journal’s Fall 2016 issue:

“Residential Elements of Comparison – Transactional Adjustments,” by Arlen C. Mills, MAI, SRA, considers transactional elements in sales, including financing, conditions of sale and changes in market conditions. The article discusses how these transactional factors may affect sale prices and consequently require adjustment to the appraised value of properties.

“The Stabilized Capitalization Rate,” by D. Richard Wincott, MAI, proposes a standard point of reference for understanding the capitalization rate, specifically when applied to office, retail, industrial and multifamily properties.

“Analyzing Retail Store Closures,” by Donald R. Cavan, discusses how investigating store closures can be used to probe the underlying market conditions. The article describes how store closures can have both positive and negative effects on the local retail market.

 

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The Appraisal Institute is a global professional association of real estate appraisers, with nearly 20,000 professionals in almost 60 countries throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Individuals of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA, SRA, AI-GRS and AI-RRS designations. Learn more at www.appraisalinstitute.org.

 

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