The valuation of urban regeneration land: A contemporary perspective

A fundamental element of UK urban policy, as outlined in the Urban White Paper, is the redevelopment of inner city land (DETR, 2000). However the valuation of urban regeneration land, in connection with grant funding, is said to be one of the most vexed issues in the appraisal of projects (Beattie, 1991). This is due to a lack of transparency across valuation and property data in urban regeneration markets, shortcomings in traditional valuation methodologies (Adams et al, 1985) and complexities of public sector grant procedures. The lack of transparency in urban regeneration property markets means that it is often difficult to assess the appropriate input data into the appraisal. The value of land for development is normally estimated by the use of the comparative method or the residual approach. Guidance Note 17 in the RICS Red Book outlines the approach to a residual calculation in which the expected development cost to create the scheme is subtracted from the expected capital value on completion of the project in order to derive the expected profit. The authors were funded by the RICS Education Trust to investigate current practice in the application of Guidance Note 17. The aim of the research was to examine the bases of valuation, availability and utilisation of data, reporting of the valuation in terms of a single point estimate or a range of values and the management of risk within the valuation process. In addition the research also considered the appraisal guidelines outlined in HM Treasury Green Book. The paper reports the findings of a survey of valuers from leading practices throughout the UK, bank lenders who commission the valuations and developers who rely on valuations in terms of purchasing and selling brownfield sites. In addition an example of a valuation of an urban regeneration site is included in order to highlight the key issues within the discussion.