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Vacancy and Collection Loss <br />Small office buildings are most frequently purchased for owner -occupancy and are <br />analyzed using the sales comparison approach, with values calculated assuming no vacancy <br />or collection loss. However, from the perspective of an investor, a stabilized vacancy and <br />collection loss within the historical range is usually applied, assuming a five- to 10 -year holding <br />period. An estimated stabilized vacancy and collection loss of 3% is considered appropriate <br />for the direct capitalization analysis. <br />Expense Analysis <br />The subject property is an owner -user office building. Typically, leases for similar <br />buildings in this market are written on a triple -net lease basis, where the tenant Is responsible <br />for operating expenses for the property including: taxes, insurance, utilities, common area <br />maintenance, building repairs and maintenance. The owner is responsible for management, <br />miscellaneous expenses, and administrative costs. The capital value analysis has been <br />analyzed on a typical triple -net basis. <br />Overall Capitalization Rate <br />A review of sales and listings of office properties found that reported OARs reflect rates <br />from 4.00% to 5.00%. These sales are considered the best evidence of an appropriate <br />capitalization rate for the subject property. <br />75Q-21 <br />