Specialised Property Valuations

Characteristics of specialised properties – by Jaco Goosen 

  • Specialised properties are unique in the sense that it was custom designed and purposely built for a specific use,
  • The specialised layout and design increases construction cost and later on replacement cost,
  • As construction cost is higher than normal, construction cost serve as an entry barrier to competitors,
  • Due to its specific design and or purpose, it has little or no alternative use,
  • Conversion to suit an alternative use, would come at a costly premium,
  • Due to high conversion costs, specialised properties tend to become redundant at the end of its use/life cycle. In some instances buildings only has a salvage value and land a vacant land value.
  • The market for specialised properties is very diverse as specialised property does not often trade in the open market, or transact sufficiently to allow the establishment of price by comparison with previously sold specialised properties. Limited comparative sales data are ever recorded or available to benchmark or value against.
  • Specialised properties have limited demand when offered in the open market,
  • Due to its limited demand, specialised property is regarded as less liquid than other property assets. Financial institutions subsequently attach a high credit risk premium to specialised property.
  • Specialised property has a much higher purchaser resistance,
  • Specialised property are mostly owner occupied, with little or no accredited rental data available,
  • Specialised property can include utility buildings (eg. power plants) or public service infrastructure (eg train stations, sport stadiums)
  • Specialised buildings are mostly maintenance intensive due to their specific and specialised use,
  • Specialised Property value are mostly subject to the continuation of its existing or limited specialised use,
  • Specialised property can be labour intensive and in some instances require specialised and highly qualified staff to operate and maintain,
  • When buildings and machinery is combined in such a way to form a plant or unity, it may be regarded as a specialised property. Especially when equipment or machinery cannot be dissembled without taking the building apart. (Eg. Milling and processing plants)

The International Valuation Standards Council (IVSC) Defines Specialised Property as A property that is rarely if ever sold in the market, except by way of sale of the business or entity of which it is part, due to uniqueness arising from its specialised nature and design, its configuration, size, location or otherwise”

 

 

Monday, November 12, 8:22 pm

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