A valuation of retail property is mandatory for financing applications, purchase and sale transactions, and certain rental disputes. In addition, a valuation is strongly recommended for rent reviews, portfolio valuations, and investment decisions where an objective assessment of value is necessary. The situations in which a valuation is required or advisable are broader than many owners and tenants expect. This article answers the most frequently asked questions about valuing retail property.
For which transactions is a valuation of retail property mandatory?
A valuation of retail property is legally or contractually required for financing applications through a bank, for purchases and sales involving institutional investors, and for certain legal proceedings. Banks almost always require an independent valuation before granting a mortgage or business financing on a retail property.
In practice, there are four situations in which a valuation is not optional:
- Bank financing: All major Dutch banks require a certified valuation report before granting a loan on retail property. This applies both to purchases and to refinancing.
- Institutional purchases and sales: Pension funds, insurers, and large real estate funds are required to have their portfolios valued periodically, typically annually or quarterly.
- Legal proceedings: In cases of expropriation, estate division, or bankruptcy, the court prescribes an independent valuation.
- Subsidy and permit applications: Certain government programmes require an up-to-date valuation of the property involved.
Beyond these mandatory situations, many owners and investors also voluntarily opt for a valuation when making strategic decisions, such as redeveloping a location or restructuring a portfolio. KroesePaternotte supports owners and investors in these types of processes from a specialised position in the retail market.
What is the difference between a valuation and a rent review?
A valuation of retail property determines the market value of a property in ownership. A rent review determines the market-conforming rent for a space based on comparable transactions. Both instruments are assessments of value, but they answer different questions and are used in different situations.
A valuation focuses on the sale value or investment value of the property. The valuer looks at factors such as location, rental income, duration of lease agreements, and market developments to arrive at an objective value.
A rent review focuses exclusively on the rent per square metre. This instrument is used when a current lease agreement contains a review clause, or when the tenant and landlord cannot agree on the level of rent after the expiry of a contract period. In the Netherlands, the Civil Code (Article 7:303) offers tenants and landlords the option to apply to the court for a rent adjustment if the rent is no longer market-conforming.
For an accurate rent review, access to current transaction data is indispensable. KroesePaternotte holds a database of lease data covering virtually the entire Dutch retail market, going back to 1984. That historical depth makes it possible to substantiate market conformity with concrete comparable transactions, even in less liquid markets outside the Randstad.
How is the value of a retail property determined?
The value of a retail property is determined on the basis of rental income, location quality, the marketability of the property, and market developments in the relevant segment. Valuers use several methods for this, of which the BAR/NAR method and the DCF method are the most commonly used in the Dutch retail market.
The BAR/NAR method
The gross initial yield and net initial yield method capitalise rental income using a market-typical yield factor. A property with a stable tenant in a strong location is assigned a lower yield requirement, resulting in a higher value. The yield requirement varies considerably by location type: a supermarket in a village centre is valued differently from a fashion store on a prime A1 location in a major city.
The DCF method
The Discounted Cash Flow method projects all future cash flows over a given period and discounts them to their present value. This method is more suitable for more complex properties with multiple tenants, vacancy risk, or upcoming renovations. It provides a more nuanced picture for retail property with a mixed risk profile.
In addition to the calculation method, qualitative factors play a major role: the duration and quality of the lease agreement, the tenant’s sector, footfall, and the accessibility of the location. A valuer with specific retail expertise weighs these factors differently from a generalist.
When is a valuation needed in a rental dispute?
In a rental dispute concerning retail property, a valuation is needed when the parties cannot agree on the market-conforming rent and the case goes before a court or a rent advisory committee. In that case, the court typically appoints one or three independent experts who issue a binding opinion on the rental value.
The most common situations in which a valuation is used in a rental dispute:
- Rent review at the request of the tenant or landlord under Article 7:303 of the Dutch Civil Code
- Dispute over the rent upon contract renewal or redevelopment
- Discussion about service charges and their proportion of the total rent burden
- Valuation in the context of buying out a tenant or in the case of damage claims
A well-substantiated valuation report strengthens the negotiating position of both parties even before a case reaches the court. In many cases, a professional report leads to a settlement out of court, saving time and costs.
Who may carry out a retail property valuation?
A valuation of retail property in the Netherlands may only be carried out by a certified valuer who is registered with the Nederlands Register Vastgoed Taxateurs (NRVT) and, for institutional assignments, also meets the standards of RICS. Banks only accept reports from valuers who meet these qualifications.
The NRVT sets requirements for education, practical experience, and continuing professional development. Valuers must have demonstrable knowledge of the specific real estate segment for which they are valuing. A retail property valuer therefore holds a different qualification from a valuer who values residential properties or offices.
For complex retail assignments, such as large shopping centres, standalone supermarkets, or PDV/GDV locations, specialist knowledge of the retail market is indispensable. KroesePaternotte has the largest retail valuation department in the Netherlands. All major Dutch banks have their retail valuations carried out through KroesePaternotte, which reflects the volume and market knowledge of the team. More about the working method and the team can be found via the page about KroesePaternotte.
What does a valuation of a retail property cost?
The costs of a valuation of a retail property vary depending on the size, complexity, and purpose of the valuation. For a single retail property, costs typically range from a few hundred to a few thousand euros. For large shopping centres or complex portfolio valuations, costs run higher.
Factors that determine the price:
- Size of the property: A standalone retail unit requires less research time than a shopping centre with dozens of tenants.
- Purpose of the valuation: A bank financing valuation requires a more extensive report with more substantiation than an internal value check.
- Location: Valuations in regions with fewer comparable transactions require more market research and therefore more time.
- Urgency: Rush assignments typically incur a surcharge.
It is advisable to be clear upfront about the purpose of the valuation. A valuation report for bank financing has different requirements from a report for internal use. A specialist valuer can quickly assess, based on the purpose, which type of report is needed and what the associated costs are.
For questions about valuations, rent reviews, or a specific assignment, contacting KroesePaternotte directly is the quickest route to a concrete answer. As a specialist retail valuer with nationwide coverage and a database going back to 1984, KroesePaternotte offers the market knowledge needed for a reliable and defensible valuation of every type of retail property in the Netherlands.
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