Small-Market
Valuations
Appraisers dig for data to dete
rmine value.
T
Te demand for high-quality commercial real estate in
primary and many secondary markets has been gaining
strength during the past 12 to 18 months. As the availability of good product in primary markets has diminished, some potential buyers are considering alternatives
in smaller secondary and even some tertiary markets.
While major investors will not consider these areas,
there are outside investors that want higher returns and
understand the risks of buying in these smaller markets.
Valuing real estate becomes more difcult in secondary and tertiary markets where the lack of recent, arm'slength comparable data is a major hurdle. Other concerns
in small markets are population, job, and income growth
over the holding period. Te lack of barriers to entry is
ofen an issue based on the availability and relatively low
cost of land. Finally, the sophistication and motivations
of buyers and owners in small secondary and tertiary
markets can lead to varying sales prices.
CCIM.com
July | August | 2013
Veronica Garbutt/Getty Images
by John Scott Jr., MAI, MR
ICS
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