Zoning

Question 1

Explain the principle of Zoning?

Answer 1

• Used for retail properties to create a unit of comparison for different sized buildings
• Rationale – the rental value of the property reduces away from the street i.e. the area at the front of the shop is most valuable to a retailer as it will generate most sales
• Zone A closest to the window is most valuable with the value deceasing with distance from the frontage.
• Halving back principle with 6.1m (20 ft) zones

Question 2

On which retail pitches are 30ft zones used?

Answer 2

Some London retail streets (e.g. Oxford Street, Regent Street and Bond Street) and certain prime shopping streets in Scotland

Question 3

How are basement and first floor areas usually treated in retail properties?

Answer 3

A/10 depending upon the comparable evidence

Question 4

What types of unit will allowances typically be made for when zoning?

Answer 4

Those with split levels, excessive front to depth ratio and hard frontages (e.g. banks) depending on the comparable evidence

Question 5

How are return frontages typically dealt with?

Answer 5

• 2.5-10% uplift depending on the comparable evidence and footfall
• Use mirror zoning i.e. zone from both frontages

Question 6

What is natural zoning?

Answer 6

When the property zones reflect physical changes in the building such as steps

Question 7

When making a discount to the rent for masking in a property, how much discount would you generally apply?

Answer 7

Would generally discount at the rate between the zone the floor space is in and the rate of the zone behind i.e. if in the second zone, would discount at A/3 or if in the third zone, would discount at A/6

Question 8

Standard Zone A depths?

Answer 8

The ‘standard’ depth of zone is 6.1m (i.e. 20 feet), but longer 9.14m (i.e. 30 feet) zones are used in some locations, e.g. prime Oxford Street in London.

Question 9

Give an example of typical zones.

Answer 9

Zone A = A/1

Zone B = A/2, i.e. Zone B is half of Zone A

Zone C = A/4, i.e. Zone C is a quarter of Zone A (or half of Zone B)

Zone D (or remainder) = A/8, i.e. Zone D is 1/8 of Zone A (or half of Zone C)

Question 10

Is Zoning Measurement or Valuation?

Answer 10

Zoning is a method of valuation analysis. It allows a consistent unit of comparison to be calculated. This can then be used in comparable analysis when assessing rental value.

Question 11

What is zoning not used for?

Answer 11

Zoning is not typically used for larger retail units, e.g. department stores, or for supermarkets, convenience stores or retail warehouses. This is because the large size would skew the zoned analysis (i.e. resulting in an unjustifiably high overall rent), even with an evidence-based quantum allowance applied (more about this later on).