How do you check if a retail property has been correctly valued?

Justus Hayes - Research ·
Taxateur houdt klembord met vastgoedwaardering voor etalage van winkelunit op Nederlandse winkelstraat.

A retail property is correctly valued when the valuation report has been prepared by a certified appraiser, is based on market-comparable reference transactions, and meets the standards of RICS or the Dutch Register Vastgoed Taxateurs (NRVT). The quality of a valuation depends on the appraiser’s specific retail expertise and the currency of the market data used. This article covers the key questions you should ask to assess a retail property valuation.

What methods are used to value a retail property?

Three methods are most commonly applied when valuing a retail property: the comparative method, the rental value capitalisation method, and the discounted cash flow method (DCF). The choice depends on the purpose of the valuation, the type of property, and the availability of comparable transactions in the market.

The comparative method directly compares the property with recently let or sold comparable properties. This works well in active high streets where sufficient transaction data is available. The rental value capitalisation method calculates the market value based on the rental value of the property, multiplied by a market-consistent factor. This factor, also known as the capitalisation factor or yield, reflects the risk and attractiveness of the location.

The DCF method is more commonly used for complex properties such as shopping centres or long-term leases. Future cash flows over a longer period are discounted to their present value. For standalone retail properties in city centres, the rental value capitalisation method is generally the most widely used and transparent approach.

What should a correct valuation report for a retail property contain?

KroesePaternotte · Since 1984
A retail question deserves a specialist answer.
Speak directly with our retail real-estate specialists in Amsterdam.

A correct valuation report for a retail property must contain at minimum a clear description of the property, the valuation method used, the substantiation of the rental value, an overview of comparable transactions, the capitalisation factor, and the concluded market value. If any of these elements is missing, the report is incomplete.

In addition to the core elements, a sound report should also contain the following:

  • The assignment and purpose of the valuation (acquisition or disposal, financing, rent review)
  • The definition of market value used, preferably in accordance with RICS or NRVT
  • A description of the location and immediate surroundings, including footfall or catchment area
  • The floor area of the property, broken down by net lettable area (NLA) and gross floor area (GFA)
  • The current rent and any deviations from the market-consistent rental value
  • The name, certification, and signature of the appraiser

For valuations carried out for financing purposes, major banks typically impose additional requirements on the report. Specialist retail appraisers are familiar with these bank-specific requirements and deliver reports that directly meet the acceptance criteria.

How do you verify whether the rental value used is in line with the market?

The rental value in a valuation report is market-consistent when it is substantiated by recent, comparable transactions at comparable locations. Check whether the reference transactions used are genuinely recent, comparable in terms of location, and have been adjusted for relevant differences such as floor area, year of construction, and rent-free periods.

A common mistake is that appraisers use references that appear comparable on paper but in reality have a different location quality. A property in a secondary location in a mid-sized city is not comparable to a property in a prime location, even if they are on the same street. The rent per square metre can differ significantly between those two locations.

Ask the appraiser explicitly to explain the choice of reference transactions. If the substantiation remains vague or the transactions are more than two years old, further investigation is warranted. KroesePaternotte holds a database of lease data going back to 1984, covering virtually the entire Dutch retail market. That depth makes it possible to benchmark rental values at street level — something generic appraisers cannot offer.

What are common errors in retail property valuations?

The most common errors in retail property valuations are the use of outdated or non-comparable reference transactions, an incorrect assessment of location quality, and insufficient consideration of vacancy risk or tenant-specific factors such as incentives and rent-free periods.

Other errors that occur regularly:

  • Floor area errors: confusion between NLA and GFA leads to an incorrect rental value per square metre
  • Incorrect capitalisation factor: a factor that is too low overestimates the value; one that is too high underestimates it
  • Failure to account for market developments: in a moving market, transactions from two years ago may already deviate significantly from the current level
  • Insufficient location analysis: footfall, anchor tenants in the vicinity, and accessibility are sometimes underweighted
  • Lack of retail-specific knowledge: a generic appraiser lacks the sector expertise to correctly assess tenant risk or tenant mix

This last point is crucial. Retail property requires different expertise than office or residential property. An appraiser without an active presence in the retail market simply has less access to current transaction data and market insight.

When is a second opinion or revaluation worthwhile?

KroesePaternotte · Since 1984
A retail question deserves a specialist answer.
Speak directly with our retail real-estate specialists in Amsterdam.

A second opinion or revaluation is worthwhile when the concluded market value deviates significantly from what you would expect based on the market, when the valuation report is insufficiently substantiated, or when the valuation is being used for a decision with major financial consequences such as an acquisition or disposal, a rent review, or a financing application.

Specific situations in which a revaluation is advisable:

  • The bank does not accept the valuation report or raises additional questions
  • There is a dispute over the rent at a rent review
  • The market has changed significantly since the previous valuation
  • You have doubts about the independence of the original appraiser
  • The reference transactions used are not transparent or cannot be verified

A second opinion does not necessarily mean the first valuation was wrong, but it does provide certainty when making significant decisions. If in doubt, contact a specialist retail appraiser to discuss whether a revaluation would add value in your situation.

Who is officially permitted to value a retail property in the Netherlands?

In the Netherlands, a retail property may officially be valued by an appraiser who is registered in the Register Vastgoed Taxateurs (NRVT) or certified through RICS. For valuations carried out for mortgage financing purposes, the appraiser must additionally meet the requirements of the relevant financing institution.

The NRVT sets requirements regarding education, experience, and continuing professional development. Appraisers registered in the register operate according to established quality and integrity standards. RICS-certified appraisers additionally apply the international RICS Red Book standard, which is widely recognised in the institutional market.

In addition to formal certification, specialisation in retail property is a practical prerequisite for a reliable valuation. The retail property market has its own dynamics in terms of lease structures, location value, and tenant mix that require specific sector expertise. KroesePaternotte has the largest retail valuation department in the Netherlands and carries out valuations for all major banks in the Netherlands. That combination of formal certification and in-depth retail expertise is precisely what a reliable retail property valuation requires.

Would you like to know whether your property has been correctly valued, or do you need an independent assessment? View the current listings or request a consultation directly with one of our retail specialists.

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