July 2011: Gilbert Evans has convinced an Independent Expert that when valuing an irregular shaped shop, a commercial overview must be taken to check if the answer produced by a particular valuation approach would actually be achievable in the market place and is therefore realistic.
Gilbert Evans was instructed by Signet Group to undertake a rent review of an H. Samuel shop located in Chelmsford’s High Street. The previous passing rent was £165,000 per annum and the landlord’s agent was looking to justify a rental of £208,500 per annum
Situated at the northern section of the High Street, close to the entrance of the High Chelmer Shopping Centre, the shop has an internal width of circa 41ft and an average depth of 34ft and 42ft.
The resultant configuration, whilst far from unusual, gives the shop a high degree of prominence but more importantly it also creates physical disabilities which need to be acknowledged and adequately reflected in rental terms.
To ensure a realistic rental level was determined Gilbert Evans had to persuade the appointed Expert that the shop’s configuration and resulting physical constraints not only seriously compromised tenant interest in the property but would also result in a disproportionately high rental level if zoned.
By making his Determination at £175,000 per annum, Gilbert Evans successfully persuaded the Expert that ‘the market’ and subsequent retailer expectations and requirements should take precedence over mathematical calculations.
Through the force of its argument, Gilbert Evans persuaded the Expert to accept the most fundamental principle that a commercial overview must always be taken to check if the answer produced by a particular mathematical approach is realistic and actually achievable in the market place. Furthermore if the answer from a particular mathematical approach is unrepresentative of that which would actually be achievable in the market place, then that particular approach should not be adopted as it produces an end result which is at odds with the realities of the market.
In his rental Determination the Expert valued the property by applying an overall rate and made reference to the zoning basis as a check only. He accepted our argument that whilst the zoning method of valuation is usually the first approach to value retail units, it only works well when comparing stores with only slight or moderate differences in size and configuration.