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Location Adjustment For High Visibility Location

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undergroundPOP

Sophomore Member
Joined
May 29, 2013
Professional Status
Certified Residential Appraiser
State
California
The subject property is a retail building located at a prime intersection that is essentially the southern gateway to the city. I've been trying to isolate a locational adjustment based on traffic counts, but that data is not consistently reported in all market areas.

What are some other ways to support a locational adjustment? I'm considering making a subjective % adjustment, but I will need some data to back up my decision.
 

undergroundPOP

Sophomore Member
Joined
May 29, 2013
Professional Status
Certified Residential Appraiser
State
California
It's just my gut feeling that the subject is locationally superior based on the visibility and overall location. I'm not trying to force any adjustment, but I just want to make sure that I have thoroughly done my research.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
While traffic counts is certainly linked to location, traffic counts alone do not tell the complete tale. Being on a busy street between Destination Points A and B is not as good as being at Destination Points A or B.
An analysis of rents will confirm or refute what your gut tells you. Combining that with traffic count analysis (something I don't see done enough when it should be done) would be providing a more thorough analysis.

Good luck!
 

Gobears81

Senior Member
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Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
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techbiker

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Dec 4, 2015
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General Public
State
Texas
I just read a study that indicated a strong correlation between high visibility corner commercial lots and increased property value, at least in Texas.
Without knowing all of the information, your gut might be right. I did an appraisal just last month and used two comps that sold in similar time periods. One was less than 0.25-miles from the other and both were on a primary east-west road. Both technically were at corners with traffic signals, but the second street for the lower sale was essentially an access road, whereas the first was also on a primary north-south road. The one selling at the prime intersection sold for 83% higher than the other on a unit basis, with no other significant differences outside of the one having superior access and exposure. The higher comp sold for somewhat of a premium (perhaps 5%-10%), but even though I'm halfway across the country, I bring this data up because marketable sites on prime intersections often bring in different buyers than those on less marketable sites, and I've seen significant differences in prices paid for these sites.

That's what I found while searching for our first commercial property. At least here in the DFW suburbs, the closer a property is to being a corner parcel at a highway over/under pass, the more valuable it typically is. Here is the general trend I've noticed going from most to least valuable:

1. corner parcel @ highway under/over pass
2. corner parcel @ high traffic (80,000 vpd+ combined) intersection
3. parcel located along highway access road
4. corner parcel @ medium traffic intersection
5. non-corner parcel @ high traffic intersection
6. corner parcel @ intersection of high and low traffic streets
etc... all the way down to a parcel located on unpaved farm road XYZ

*This is just my observation.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
I just read a study that indicated a strong correlation between high visibility corner commercial lots and increased property value, at least in Texas.


That's what I found while searching for our first commercial property. At least here in the DFW suburbs, the closer a property is to being a corner parcel at a highway over/under pass, the more valuable it typically is. Here is the general trend I've noticed going from most to least valuable:

1. corner parcel @ highway under/over pass
2. corner parcel @ high traffic (80,000 vpd+ combined) intersection
3. parcel located along highway access road
4. corner parcel @ medium traffic intersection
5. non-corner parcel @ high traffic intersection
6. corner parcel @ intersection of high and low traffic streets
etc... all the way down to a parcel located on unpaved farm road XYZ

*This is just my observation.
It's a good point. I read the original post too fast and thought that he was referring to site values not total property values, so I went back and deleted the post. That is about the third time I've done something like that recently and probably need to slow down and read these posts a little more.
I remember doing an appraisal of a proposed single-user office building on a prime intersection. At that time, the costs were considerably higher than what it would cost to build in an office park for example, but the total value wasn't all that much higher. That was strictly functional obsolescence attributable to a super-adequate site. Could that be the case here? Maybe somewhat, though most likely less than what would be incurred by the aforementioned office building. But I agree with Howard regarding rents most likely providing as good of evidence as any.
 

undergroundPOP

Sophomore Member
Joined
May 29, 2013
Professional Status
Certified Residential Appraiser
State
California
It's a good point. I read the original post too fast and thought that he was referring to site values not total property values, so I went back and deleted the post. That is about the third time I've done something like that recently and probably need to slow down and read these posts a little more.
I remember doing an appraisal of a proposed single-user office building on a prime intersection. At that time, the costs were considerably higher than what it would cost to build in an office park for example, but the total value wasn't all that much higher. That was strictly functional obsolescence attributable to a super-adequate site. Could that be the case here? Maybe somewhat, though most likely less than what would be incurred by the aforementioned office building. But I agree with Howard regarding rents most likely providing as good of evidence as any.

There is somewhat of a condition of functional obsolescence here as the site is being used for a tire shop at a busy intersection that would be better suited as a McDonald's or Starbucks. The provided financial reports show that the tire shop is bringing in some big bucks, which I think may be attributable to the location. But if Mickey D's came knocking on your door with a checkbook, then I think the owner might be hard pressed to make a deal...
 

undergroundPOP

Sophomore Member
Joined
May 29, 2013
Professional Status
Certified Residential Appraiser
State
California
After looking for a traffic count database, I realized that I had one right under my nose in Costar. If you use Costar, then traffic counts are available to you under demographics data.

Thanks everyone for your responses. I'm finally shoring up my location adjustment!
 

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico
The subject property is a retail building located at a prime intersection that is essentially the southern gateway to the city. I've been trying to isolate a locational adjustment based on traffic counts, but that data is not consistently reported in all market areas.

What are some other ways to support a locational adjustment? I'm considering making a subjective % adjustment, but I will need some data to back up my decision.

One thing to look at is land values. While you may not be able to determine an exact land value for some of your comps there is generally a premium for a corner and the closer you get to a corner the higher the land value (i.e. the parcel next to the corner parcel will generally sell for more than the one that it mid-block a few parcels away). A corner or other retail location along a high traffic street will generally have a higher value than one along a low traffic street, albeit that difference could be skewed if one is in a high-income area and another is in a low-income area as an example.

I remember back when I was first starting out my mentor told me to take a stab at the adjustment grid for a property, I can't recall if it was retail land or a retail building. I pulled up all the traffic counts for my subject and the comps (ranging from about 15k to 40k) and started making a mechanical adjustment based on the difference. My subject was at 30k so I made a -25% adjustment for the comp at 40k and so on. When my mentor looked at it she asked me where I found the support for that. I hadn't found any support of course so I erased all those adjustments and went back to look for some actual data.

Since then I've learned to look at traffic counts in a more holistic way when considering location adjustments. It's hard to find true paired sales or other definitive proof but it's ok to make an adjustment based on your experience and use sensitivity analysis to determine if it's reasonable. Is a location with 25k traffic counts 5% superior to the one with 40k traffic counts, is it 7%? Is it only 3%? Well it's probably more than 0% but less than 15%.
 
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