COMMERCIAL
INVESTMENT
PROPERTY:

VA L U AT I O N
METHODS
An Information Paper

ACKNOWLEDGEMNTS: The Publisher would like to express its thanks to
Estates Gazette, the South Bank University and Jones Lang Wooten for permission to reproduce definitions taken from The Glossary of Property
Terms (Estated Gazette, 1989).

Please note: References to the masculine include, where appropriate, the feminine. Published by RICS Business Services Limited, a wholly owned subsidiary of
The Royal Institution of Chartered Surveyors, under the RICS Books imprint
Surveyor Court
Westwood Business Park
Coventry CV4 8JE
UK
No responsibility for loss occasioned to any person acting or refraining from action as a result of the material included in this publication can be accepted by the author or publisher.
ISBN 0 85406 802 3
© RICS May 1997. Copyright in all or part of this publication rests with the RICS, and save by prior consent of the RICS, no part or parts shall be reproduced by any means electronic, mechanical, photocopying, recording or otherwise, now known or to be devised.
Reprinted 2001
Printed by Quorn Litho

Contents
Information Papers
Executive Summary
Preface
1
1.1
1.2
1 .3
2
2.1
2.2
2.3
3
3.1
3.2
3.3
3.4
3.5
4

4.1
4.2
4.3
4.4
5
5.1
5.2
6

6.1
6.2
6.3
7
7.1
7.2
7.3
8

8.1
8.2
8.3

4
5
7

Valuation and Calculation of Worth
A discussion of the role of the valuer and the distinction between valuation, appraisal and calculation of worth.
Introduction
Valuation and Calculation of Worth
Pricing Models-Valuation

9
9
9
10

Appraisal Mathematics
A study of present value theory, net present value and internal rate of return.
Introduction
Net Present Value (NPV)
Internal Rate of Return (IRR)

11

The Valuation of Rack-rented Property
A comparison of DCF and conventional approaches to