The valuation of industrial property with declining operation returns

Abstract

It is usually impossible to measure the value of a property directly. Thus, the appraisal process depends upon judgment based on various evidences of value. The valuation procedure is usually divided into four categories [2]: 1) define purposes of the valuation, the parties, place, and tine, 2) define property to be considered, 3) develop the evidences, and 4) weigh the evidences and determine estimate of value. From the above, the evidences of value are of interest and require further explanation. Marston et al. presented three evidences of value in their text [1]: Market price, cost of replacing the service rendered by the property, and present value of the future returns from the property are usually relatively good measures of the value of property to the owner. Babcock divided the category of evidences as the income method, the replacement cost method, and the market comparison method [4], Based on the sources cited above, three evidences of value can be defined. These are: 1) market evidence, 2) cost evidence, and 3) income evidence. These three approaches are commonly accepted as bases for judgmental determination of value. A description of each of these evidences follows. B. The Market Evidence The market evidence of value consists of an investigation of prices paid for similar properties in a ready and open market. The market