Table of contents

According to the comparison method, to calculate the value of a property asset (V), one should simply multiply two parameters: the surface area of the asset (S) and the price per square meter (P sq. m.) of a comparable property: V=S* P sq. m.

This method seems very simple. However, the problems arise when it comes to choosing the assumptions.

  • What surface area should be considered?
  • Which property should be considered comparable?

Surface

To answer the first question, we need to distinguish between assets according to their use. There are three main types of assets:

  • Residential
  • Office
  • Retail

For each type of assets experts tend to use a different surface area:

Residential

  • Living surface area
  • Gross/net floor area

Office

  • Gross/net floor area
  • Marketable area

Retail

  • Marketable area
  • GLA (Gross Leasing Area)
  • Weighted useful area

The living surface area excludes the surface area occupied by walls, partitions, steps and stairwells, door and window frames, and surfaces less than 1.80m high.

The net usaful floor area corresponds to the area of the premises reserved for work.

To obtain the gross floor area, simply add to the net floor area the sanitary facilities, social areas and horizontal corridors.

The marketable area corresponds to the gross useful area, provided that the common areas (e.g. horizontal corridors) are included.

The weighted useful floor area is obtained by breaking down the gross useful floor area into zones with coefficients that vary according to their commercial interest.

The GLA area corresponds to the net floor area of a retail premises, plus ‘ancillary’ areas (area under awnings, external landings, etc.). It does not include roadways common to different lots.

Comparable properties                          

The second step of the method consists of looking for references in relation to transactions involving comparable properties on the real estate market.

How can assets of the same type be defined? In general, valuers use three key criteria: the category of the property, its geographical area and the length of the sales period.

Where do valuers find this information? Their main sources are notaries and estate agents. Valuers should not refer to the prices of assets quoted in newspapers, as it is the opinion of the valuers that influences the market.

This method requires the valuer to carry out an objective analysis of the real estate market. The reliability of the results obtained by this method depends on the exhaustiveness of the research.