VALUATION OF…
Office
CBD and suburban office buildings and towers, valued on grade, tenant covenant, and lease profile.
Content status: Methodology and evidence log — Sources, Caselaw and Market Information are added incrementally.
Methodology
Office buildings are valued primarily on an income basis. Where let to a single tenant on a straightforward lease, the Income Capitalisation Method is generally sufficient; where multi-tenanted with a fragmented expiry profile, the Discounted Cash Flow Method is the preferred primary method, as it better captures reversion timing and letting risk.
The analysis follows the Big Five framework: Income Generating Units are identified per floor or suite, together with parking and ancillary income such as signage or rooftop leases; contract rental is distinguished from market rental at each unit’s expiry; a vacancy allowance and normalised operating expenditure are applied, with capital items such as lift and HVAC replacement provided for separately; and the resulting income is discounted or capitalised at a rate reflecting grade, node, tenant covenant and lease expiry profile.
Building grade (A, B or C) and node quality are the dominant value drivers and should be made explicit rather than absorbed into the discount rate. A Direct Comparison cross-check, expressed as a rate per square metre of gross lettable area against sales of similar-grade buildings in the same node, is used to test the income-based value.
Caselaw
Case law, regulatory rulings and expert-determination disputes relevant to valuing this asset class. Each entry cites its source and summarises the practice implication for valuers — this is not investment, financial, or legal advice.
The Evidence Log is for VDH Members
The Evidence Log for Office — sourced sales, disposals and rentals with Valuer’s Lens commentary — is included in VDH Membership: from R125/month for SACPVP candidates and students, R399/month standard. All prices include VAT.
The methodology and case law on this page remain free to read.