Market Value and Rent Reviews
Market Value is an estimated value in exchange, or the amount a property would bring if offered for sale in the (open) market at the date of valuation under circumstances that meet the requirements of our industry Market Value definition.
To estimate Market Value, a Valuer must first determine highest and best use, or most probable use.
Market Value is estimated through application of valuation methods and procedures that reflect the nature of property and the circumstances under which a property would most likely trade in the market.
The most common methods used to estimate Market Value include the Sales Comparison approach, the Income Capitalisation approach, including Discounted Cash Flow Analysis, and the Cost Approach.
Your lease document will invariably describe the terms and mechanism for a rent review or lease option.
Reading this is an essential first step to answering the question. Current leases may stipulate an experienced API Registered Valuer is required and that’s where we are able to assist. We have API registration and experience to determine a fair market rent and assist you in such an important procedure.
The lease document may spell out assumptions and basis of the valuation. For example the lease may give directions the valuer must follow, appropriate legislation e.g. Retail Leases Act, assumptions they should make, matters they must take into account, and matters they should disregard e.g. it is usually required to exclude from the review assessment the benefit of the tenants’ fit out and goodwill.