Valuing the refurbishment cycle

K.C. Wong (Department of Real Estate and Construction, University of Hong Kong, Pokfulam Road, Hong Kong)

Property Management

ISSN: 0263-7472

Publication date: 1 March 2000

Abstract

This paper presents a simple method to assess the value of a commercial property, considering the cost and timing of refurbishment. It is constructed on the understanding that net rental income tends to decrease as the property ages, while maintenance cost increases with time. As a result, there is a desirable duration of successive leases, at the end of which refurbishment can take place. A suitable choice of this duration could give a higher value to the property. By assessing the value of a property over one refurbishment cycle, values for similar successive cycles can be capitalised. This approach is equivalent to finding the annual equivalent of the discounted cash flow over one cycle, and then capitalising it as if it is a constant income to perpetuity.

Keywords

Citation

Wong, K.C. (2000), "Valuing the refurbishment cycle", Property Management, Vol. 18 No. 1, pp. 16-24. https://doi.org/10.1108/02637470010311645

Publisher

:

MCB UP Ltd

Copyright © 2000, MCB UP Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
If you think you should have access to this content, click the button to contact our support team.