Assessment of Present Market Value of Industry & Factory Property

There are many factors that have an impact on the value of industrial property. we found that there are nine factors (15 sub-factors) that will affect the value of industrial property. The factors have been categorized into two themes: macro-economic and microeconomic. Seven are macro-economic factors such as economic, government intervention, industrial agglomeration, transport and infrastructure, technology level, climate variable, environmental contamination. There are two remaining factors for microeconomic factors, i.e. location and physical characteristics. As a result, most authors have studied that the level of technology is the main factor (24 percent) affecting the value of industrial property. The location of the property is not the only factor affecting the value of industrial property, but the level of technology and environmental contamination, which are also the main factors affecting the value of industrial property. These factors are useful for estimating the value of property as well as considerations for investors. Further studies are needed to validate the framework. The opinions of industry players and stakeholders as a whole may be used for this purpose.

There are three main methods of valuing industrial and commercial property:

  1. Investment Approach
    This is where the buyer looks to receive a capital return on outlay in the form of rental income together with capital value increases resulting from regular rent reviews. It is generally accepted in the marketplace that the most appropriate and widely used market based method of valuation for commercial/industrial properties is the investment approach.
    Within this method there are two models – Income Capitalization (where income is capitalized at a yield rate into perpetuity taking into account shortfall or surplus rentals) or a Discounted Cash flow Analysis (forecasts future cash flows over a period – generally 10 years and estimates the value at the end of the period and then discounts it back to the present day).
  2. Direct Comparison
    Comparison of the subject to sales of similar properties. This is considered the most appropriate method but generally comparisons are not always available.
  3. Depreciated Replacement Cost
    This approach involves the estimation of the land and building components of the property as separate valuation figures and the summation to provide an indication of market value. It is based on the principal of substitution relying on the theory that a prudent purchaser is influenced in arriving at a suitable price by the cost to construct a comparable property less depreciation and obsolescence.
    The Investment and direct comparison approach is based on market information whereas the less used method is the Depreciated Replacement Cost which is based on a current cost to replace their depreciated for age, obsolescence and condition. This type of assessment is used more for specialist type properties where there is no market evidence. It also does give a comparison with actual costs in relation to market sales.