Apartments Not including duplexes, four-plexes, group housing, etc., there are well over 20,000 apartment properties in the Greater Portland and Greater Seattle market areas. Add other primary markets in Washington, Oregon, and northern Idaho, and we have a substantial amount of apartment inventory. Most apartment properties within that inventory will probably, sooner or later, be the subject of an appraisal assignment. With all apartment appraisals we attempt to identify the probable purchaser profile and then simulate typical purchaser behavior. Expense and cost comparables are used in addition to comparable sales and rentals. The result should be a reasonable reflection of investor behavior. We, the appraisers, conduct our own market surveys because, in addition to being confident the data is representative of the subject market, we receive a wealth of residual information during the interviews. In summary, we attempt to provide as much relevant detail as is necessary to adequately reflect typical market behavior, and then logically deduce such behavior as it relates to the property appraised. Condominiums Centrally-located, high-end condominium units are gaining greater acceptance and popularity as the population ages. Boomers who even 10 years ago would not have considered moving to a condominium are now doing it. Proximity to business, entertainment, and recreation in locations that might otherwise be unaffordable, has changed the general perception of condominium living. At the same time, lower-priced condominiums may provide the most feasible path to home ownership for entry-level purchasers. Particularly in congested suburban/urban areas, proximity to employment and entertainment makes sense for younger people. The extent to which residential real estate in some areas has appreciated in the last 10 years is amazing. There is little to suggest this will not continue to be the trend during the next 10 years. Purchases of both entry-level and high-end condominiums often make good economic sense, a fact not lost on a significant portion of residential purchasers. Seattle periphery and downtown condominium absorption rates have consequently been healthy. The Seattle and downtown Portland trend is indicative of what can be expected in other metropolitan locations. Values should continue to increase in most locations. Office and Retail Properties Office floor plate size and configuration affect income productivity which, in turn, affects value. Also, as the adage goes, you can never have too many corner offices. HVAC, elevator banks, complementary retail and restaurant accommodations, ingress and egress, security measures, appearance and common areas also affect income production in varying degrees. Parking availability and accessibility impact value for either retail or office properties. Responsive building management, bandwidth capacity, and conduit accessibility are additional concerns. For Retail tenants, relevant intervening variables include individual tenant sales volume. A successful tenant will not want to move, will be more willing to accept a higher rate increase upon lease renewal, and is unlikely to either require downsizing or experience lease default during the interim period. Alternatively, a struggling tenant will probably not want to remain in their present location, implying prospective vacant space at the time of lease expiration or perhaps sooner. Weak sales can, however, be affected by inadequate tenant location and mix. Sales potential and, subsequently, value can be enhanced with location and mix modifications. Residential Subdivisions Residential subdivisions are physically challenging because, as one developer stated, “The gremlins live in the ground,” and no development is more sensitive to the dirt than a subdivision. Sensitivities extend beyond the dirt, however. Present neighbors may prefer no more neighbors; some environmentalists prefer no growth. The subsequent hostility toward new development may manifest itself in the form of studies. Opponents may judge some or all of these studies inadequate—requiring more studies. The political obstacles in the path of preliminary plat approval are formidable. The consequences are an effective supply reduction and increases in development costs, lot and home prices.  With any subdivision appraisal, adequate discovery of competing inventory, whether existing, under development, or proposed, is necessary to estimate market demand adequacy, providing reasonable assurance of adequate absorption at values projected. Residential demand is estimated from an analysis of labor market and population trends. Our subdivision appraisals give the reader a comprehensive residential market overview. Hospitality Facilities Appraising hospitality facilities and restaurants is unique because of upside potential linked to management proficiency. We have seen seemingly marginal properties become very profitable with management changes. In one instance, over a two-year period the average room rate doubled and the occupancy increased 20%, with no significant market changes. The question is to what extent business behavior affects real estate value because, in varying degrees, it always does. Management proficiency is, therefore, a germane concern. Other considerations, in addition to “all the comforts of home,” include destination location proximity, guest profile, room lay-out, sizes, and mix; banquet and conference facilities; accessibility; visibility and exposure. While we are competent to appraise most motels and restaurants, for larger, five-star facilities we recommend contacting Paul Jinneman, MAI, Jinneman Kennedy & Mohn (206-295-8560); or Scott Biethan, MAI, CB Richard Ellis (206-292-6198); specialists in larger hospitality facilities appraisals. Industrial We have appraised a wide variety of light industrial properties in Spokane, Portland, and Seattle markets. Building sizes have ranged from under 10,000 square feet to over 250,000 square feet. Uses have ranged from toy manufacturing to cross-dock truck terminals. Valuation considerations include ease of access, maneuvering areas, ceiling heights, docking facilities, office build-out and relative location. Other considerations can be conveyor systems, refrigeration areas, HVAC, lighting, inside loading/unloading capability, sprinkler systems, and employee accommodations. Self-storage facilities also need ease of access and, preferably, a location near larger employment or population bases, although profitable exceptions exist. Visibility and exposure are also important in terms of maximizing occupancy levels. We have appraised self-storage facilities in diverse locations, both urban and rural, ranging from under 100 units to nearly 1,000 units. Generally speaking, self-storage development can enjoy above-average profitability. Where demand is favorable, income levels can justify values significantly exceeding development costs. In addition to visibility, exposure, and location, adequate/evident security and conscientious management are necessary to maximize income productivity. Land The appraisal of undeveloped land can be more challenging than many would expect because value is correlated with development potential and, since development potential is a function of zoning, topography, soils conditions, off-site development expenses, the extent of competition, and the level of immediate demand, simulating market behavior can involve issues which are quite complex. Finding comparable sales is usually not extremely difficult but, on the other hand, we have appraised parcels that were one-of-a-kind, typically waterfront in locations where surrounding properties had been built-out for decades, or where redevelopment of competing properties was restricted. Other Property Types CJM also appraises unique properties such as churches and convenience stores/service stations. Gradual growth of planning department anti-church bias over the past 50 years has generated a supply/demand imbalance. As churches expand, they occasionally reach the point where existing facilities become inadequate; however, in many cases additional expansion is not allowed, and the lengthy (years) approval process for new church development in an alternative location is prohibitive. Subsequently, when a larger church facility becomes available, the ultimate purchase price is often a result of prospective purchasers making offers exceeding the initial asking price. Convenience store/service station value is a function of location, while location desirability can be correlated with gasoline and store sales volume. Consequently, when appraising a convenience store, we weigh historic gasoline volume, and also use (as part of one valuation technique) total sales together with cost of goods sold. This technique conforms with typical investor behavior. Other unique property appraisals have included truck stops, carwashes, bowling alleys, theaters, marinas, airplane hangars, and wetlands. Market Studies The proper time to contact an appraiser is slightly before you contact your architect. Attempt to accurately target the market. Within zoning restrictions, what use is most in demand? What do people need? What is the probable tenant profile? What will that tenant expect? If multifamily, what unit types are in greatest demand? If a mixed-use project, what should that mix be? What germane characteristics should be targeted? We can feed that research to your architect and, working with you and your architect, general alternative scenarios in the effort to accurately target market demand, while maximizing functional and economic efficiency. Aesthetics? Simplicity is the essence of good design. Occasionally an income-producing property may not be maximizing its potential but the reason is not immediately evident, at least not to a prospective investor. Under these circumstances a study focusing on the subject property’s characteristics and market interaction would be appropriate. The great enemy of the real estate developer is wishful thinking. Use your imagination, but before you decide, let us check the fit. You may have a good idea -- but how many other people have the same idea? What is the market depth? We might be able to enhance your profit potential while saving you from a dreaded learning experience. Because the appraiser is the one who estimates value (and in the process, relative project feasibility), to maximize value and feasibility potential, involve the appraiser from the beginning. Don’t wait until the end to see if your concept most accurately targeted the market.

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