Benchmarking and valuation issues in measuring depreciation for European office markets

Neil Crosby (School of Real Estate and Planning, Henley Business School, University of Reading, Reading, UK)
Steven Devaney (University of Aberdeen Business School, Aberdeen, UK)
Vicki Law (School of Real Estate and Planning, Henley Business School, University of Reading, Reading, UK)

Journal of European Real Estate Research

ISSN: 1753-9269

Publication date: 10 May 2011

Abstract

Purpose

The paper addresses the practical problems which emerge when attempting to apply longitudinal approaches to the assessment of property depreciation using valuation‐based data. These problems relate to inconsistent valuation regimes and the difficulties in finding appropriate benchmarks.

Design/methodology/approach

The paper adopts a case study of seven major office locations around Europe and attempts to determine ten‐year rental value depreciation rates based on a longitudinal approach using IPD, CBRE and BNP Paribas datasets.

Findings

The depreciation rates range from a 5 per cent PA depreciation rate in Frankfurt to a 2 per cent appreciation rate in Stockholm. The results are discussed in the context of the difficulties in applying this method with inconsistent data.

Research limitations/implications

The paper has methodological implications for measuring property investment depreciation and provides an example of the problems in adopting theoretically sound approaches with inconsistent information.

Practical implications

Valuations play an important role in performance measurement and cross border investment decision making and, therefore, knowledge of inconsistency of valuation practice aids decision making and informs any application of valuation‐based data in the attainment of depreciation rates.

Originality/value

The paper provides new insights into the use of property market valuation data in a cross‐border context, insights that previously had been anecdotal and unproven in nature.

Keywords

Citation

Crosby, N., Devaney, S. and Law, V. (2011), "Benchmarking and valuation issues in measuring depreciation for European office markets", Journal of European Real Estate Research, Vol. 4 No. 1, pp. 7-28. https://doi.org/10.1108/17539261111129443

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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