At Vickery Holman we regularly undertake valuations of commercial assets for pension fund purposes, including; retail, office and industrial properties. When property is held in a pension fund, a Red Book valuation is required every 3 years as part of the actuarial valuation process, which must be undertaken by a qualified Chartered surveyor.
We were instructed to undertake a valuation of an office in Bristol city centre, held within a pension fund. The property comprised part of a large purpose built office block, providing newly refurbished office accommodation.
When inspecting the property, we took note of key factors that impact value, including being in a prime office location within central Bristol and researching neighbouring occupiers. We had consideration for property characteristics such as condition, specification and amenities; we also measured the property on a IPMS3 office and Net Internal Area (NIA) basis. NIA measurements were taken in order to ensure the property could be accurately analysed against comparable properties, in instances where floor areas were provided on an NIA basis.
The office had recently been let after being openly marketed. As the property was occupied under a lease, we undertook the investment method of valuation. We sought similar recent office investment transactions, which we analysed, considering a range of factors, in order to select an appropriate yield for the subject. To determine a Market Rent we had consideration for recent transactions within the locality and within similarly desirable office locations in central Bristol, having particular regard for factors such as specification. We also had consideration for the open market letting of the subject itself. In this instance we determined that the passing rent was in line with the Market Rent. Therefore, we capitalised the Market Rent in perpetuity using the selected yield. After deducting purchaser’s costs we derived a Market Value for the property.
In addition to providing our opinion of Market Value, the pension provider requested that we outline appropriate lease terms for the property. Underpinned by our market knowledge, we had consideration of the comparable evidence in order to establish appropriate lease terms in the market at the time of valuation.
We provided the client with a comprehensive and detailed Red Book valuation report for pension fund purposes, which outlined our opinion of a fair and accurate Market Value. The property was valued in line with RICS standards, based on current market conditions, to ensure the pension fund’s asset value was reported transparently and in compliance with regulatory standards.
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