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5 FEB 2020

An industry in flux: what's next for valuation?

The changing nature of the world of work and automated valuation models is creating both opportunities and challenges for valuation professionals. We’ve spoken with expert speakers joining the upcoming RICS Valuation conference to find out about the key developments in their area of valuation.

New models of flexible office space often present an unknown entity for valuers. How should they approach this market?

Charles Golding - Tangible Assets Valuation Associate Director, RICS:

There have been major changes in the flexible workspace market, and a lot of it overlaps with the investment market and digital technology.

The issue is, people get mixed up as to what exactly it is they're valuing. It’s vital to get back to first principles. A classic example is, when valuing a flexible workspace, a particular operator may be turning over a large amount of money. However, when it comes to the market value of the property that operator might sell it and move on tomorrow, so if you try to value a property on the basis of business value it can come a cropper later on.

Equally, some people are saying to us that traditional real estate valuers that we are being too conservative, basing it on the value to an office operator or vacant possession value.
 
Some people are suggesting a sort of middle way like how you would value a hotel, looking at the sort of turnover that the particular occupier would put forward. There's some danger to that method but also benefits.

In 2017, RICS published a paper on The future of valuations looking at current trends in Automated Valuation Models (AVMs). In your opinion, is the reliance of technology going to help or hinder the role of the valuer?

Tom White - Partner, Clyde & Co:
 
The use of automated valuation models has brought with it the concept of margins of error, or brackets. When a court is deciding whether you're liable they look at the range of values which a competent valuer could have come to and if you're within that range and you're not liable, the use of tech may mean that range gets smaller.

Building in the sky
The role of technology is an interesting question for the future of valuation

For example, if you've got a computer programme telling you the figure is x, that gives you more certainty about what the figure should be. I know some of these systems even give you a degree of certainty about how confident the system is on this figure, so potentially you could have a much smaller bracket or margin of error because of this technology.

The use of automated valuation models is certainly a good thing, because it helps valuers be more accurate and consistent, and should ultimately reduce the risk of incurring liabilities in valuation work.

Why is development property valuation the subject of major interest at the moment, and what’s changing?

Neil Crosby – Professor of Real Estate, University of Reading

RICS has been heavily involved in two initiatives over the past two years. The first was the completion of the long overdue rewrite of RICS Valuation Information Paper No 12, published in 2008, which has been transformed into a global guidance note The valuation of development property and published after consultation in October last year. 

The changes are significant, with very specific recommendations over the techniques to be applied and the weighting of the valuations from the various techniques when coming to decisions over the valuation outcome. These changes also reflect the considerable academic research and industry development that has gone into development appraisal over the past ten years. 

This research and development has been, in part, prompted by the second major initiative and that is the UK-based planning policy which puts development viability at the heart of LPA decision-making in England. 

Following the publication of new Government planning practice guidance in 2018, RICS has recently consulted on a draft of its revised Financial viability in planning guidance note and the RICS Valuation conference will address the direction of travel in this important area of Government policy and industry practice.

Hear more views

With dedicated breakouts for Real Estate, Machinery and Business Assets, Trade Related Property and Arts and Antiques valuation, gain a deeper understanding of the latest industry developments at the RICS Valuation Conference 2020 on 3 March.