Retail Zoning - Lecture notes 2 PDF

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MSc Real Estate Valuation and Investment Lecture delivered by Mike Patrick....

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First part of coursework – implicit valuation. Second part (calculation of worth) – explicit valuation – add in adjustment to rental growth and use the target return instead of the ARY (layout is similar to implicit). Can be in full DCF format. Set up scenarios – optimistic and pessimistic – same as full DCF format. Ignore purchase and sale costs. Retail Zoning

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A shop that has a very wide window on the high street is worth more than a shop of the same size with a smaller window. It is the window that attracts customers into the shop to spend money. Wider frontage = worth more. It only applies to small shops on streets; it does not apply to department stores and/or retail warehouses (these are valued on an overall rent per m2 basis). Some shopping malls have turnover leases – they pay a % of what they turn over (mostly fashion shops). Adjustments made for corner shops with a ‘return frontage’ (windows on 2 sides)

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Zones (which shops are divided into) are 6m/20ft deep. Each zone is worth half the zone before it – this is called ‘halving back’. Shops with more Zone A frontage are worth more and have higher rents. ITZA (In Terms of Zone A) – upper floors are usually 1/16th

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