The valuation of the site in depreciated replacement cost and contractors basis valuations

Abstract

Examines a practical problem that arises in the Depreciated Replacement Cost (DRC) valuation of specialised property assets, particularly those owned by Central Government and the National Health Service which are subject to capital charging. The DRC approach values the site on a market basis and the building on a cost basis, adjusted for obsolescence, and aggregates the two elements. The literature and most practitioners having tended to focus on the problems of the cost elements, aims to look more closely at the problems relating to the site valuation. Different approaches significantly affect the value and can also react perversely with other strands of Government policy. While the main focus here is on Central Government property assets, these throw into sharp focus issues which are of wider interest.