MAAO UMASS 2010 ANALYSIS AND VALUATION OF PRIME AND EXCESS COMMERCIAL LAND

Transcription

1 MAAO UMASS 2010 ANALYSIS AND VALUATION OF PRIME AND EXCESS COMMERCIAL LAND

2 OVERVIEW Land classification can be determined by use or zoning Type and size of improvements will determine land value Zoning & size of improvements can determine prime site and excess Value can be determined by direct and indirect methods

3 LAND CLASSIFICATION Improved Parcels are qualified by use Vacant Parcels are qualified by zoning

4 EXAMPLE Restaurant = Commercial Factory = Industrial Fire Station = Commercial Mixed Use =????

5 VACANT LAND Zoning will typically determine prime site allocation If parcel is pre-existing grandfathered site, entire parcel becomes prime Any portion beyond zoning requirement becomes excess Granting of permit could alter allocation

6 IMPROVED LAND Size of improvements will typically determine prime site area Prime sites allocated by Land-to- Building ratio (L/B Ratio) Remainder classified as excess

7 EXAMPLE 200,000 SF Parcel contains a 35,000 SF GLA office building L/B Ratio = 4:1 Prime Site = 35,000 x 4 = 140,000 SF Excess = 200, ,000 = 60,000 SF

8 EXAMPLE 100,000 SF Parcel will contain a 20,000 SF warehouse L/B Ratio = 4:1 Prime Site = 20,000 x 4 = 80,000 SF Excess = 100,000 80,000 = 20,000

9 EXAMPLE 43,560 SF Parcel contains a 2000 SF GLA Fast Food Restaurant Zoning = 40,000 SF; LB Ratio only 8,000 Prime Site = 40,000 SF Excess = 43,560 40,000 = 3,560 SF

10 DETERMINATION OF LAND to BUILDING RATIO Examination of recent sales and new construction can give insight on market requirements for land area necessary to support a given improvement size

11 ANALYSIS OF RECENTLY BUILT C&I BUILDINGS # Street Land Size Building Size Ratio 12 Freedom Way Independence Avenue Constitution Blvd Lexington Lane Concord Court Average 4.0

12 EXCEPTIONS TO WATCH Grandfathered or Urban Lots Underdeveloped lots: Car Washes, Bank ATM Kiosks, Drive-thru restaurants Land Intensive Uses: Sand/Gravel, Car Dealerships, Agricultural, Mining, Parking Facilities, Outdoor Storage Yards

13 VALUATION Vacant Land Sales Sale Residuals Income Residuals

14 VACANT LAND SALES General, vacant Commercial & Industrial land is allocated into a Prime Site and Excess Land (if any). Excess Frontage rarely is considered, as rear developable acreage can be accessed by subdivision on a case-by-case basis.

15 VACANT LAND SALES Prime Site determined by size of proposed construction & L/B Ratio If no proposed development: Zoning controls allocation

16 SOURCES OF INFORMATION Building Permit Planning Board Media Site Inspection

17 EXAMPLE 200,000 SF Parcel contains a 35,000 SF GLA office building L/B Ratio = 4:1 Prime Site = 35,000 x 4 = 140,000 SF Excess = 200, ,000 = 60,000 SF

18 SALE RESIDUALS Work the same as residential land residual analysis Sale Price Market Value of Improvement = Indicated Land Value Residuals can be arrays by neighborhood, prime lot size, excess acres only, etc.

19 EXAMPLE Sale Price Imp Value Residual Size $200,000 $150,000 $50,000 30,000 SF $375,000 $290,000 $85,000 40,000 SF $899,000 $800,000 $99,000 43,560 SF $660,000 $550,000 $110,000 87,120 SF $500,000 $350,000 $150, SF

20 ADVANTAGES Confidence in projected Market Value is high, as Sale Price reflects actual market transaction for parcel in question. Unbiased estimate of value

21 DISADVANTAGES Limited selection of sales Transaction price may include personal property, existing lease, or goodwill Assessor still must project market value of improvements

22 What Can We Conclude? # Sale Price Building Value Land Resd Lot Size Assessed Value Ratio 1 $350,000 $249,000 $101, $330,000 $219,000 $111, $775,000 $656,000 $119, $550,000 $384,000 $166, $999,000 $756,000 $243,

23 INCOME RESIDUALS Generated income value serves as proxy for market value Income Approach Value Market Value of Improvements = Land Value And residuals can be arrays by neighborhood, prime lot size, excess acres only, etc.

24 EXAMPLE Income Value Imp Value Residual Size $240,000 $150,000 $90,000 43,560 SF $475,000 $375,000 $100,000 40,000 SF $599,000 $500,000 $99,000 43,560 SF $659,000 $555,000 $104,000 45,000 SF $500,000 $380,000 $120,000 44,000 SF

25 ADVANTAGES Income Approach allows almost every improved parcel to be used in the analysis Large sample allows for land breakdown analyses like prime site curve, excess acreage pricing, and neighborhood assignation

26 DISADVANTAGES Large number of assumptions needed to project income value Heavily dependent on quality and depth of income and expense data Assessor still must project market value of improvements

27 What Can We Conclude? # Income Value Building Value Land Resd Lot Size Assessed Value Ratio 1 $250,000 $175,000 $75, $50, $330,000 $250,000 $80, $66, $400,000 $315,000 $85, $82, $275,000 $180,000 $95, $93, $500,000 $400,000 $100, $100,