The valuation of commercial real estate plays a key role in the economy. It influences investment decisions, bank lending, insurance, and public finances. Nevertheless, this process has long relied on methodologies that respond only slowly to rapidly changing market conditions. In an environment of growing uncertainty and volatility, the need for more accurate and flexible valuation approaches is therefore becoming increasingly evident.
One of the main problems of traditional valuation methods is time lag. Property values are often determined based on data that may no longer reflect current market conditions. This can lead to the undervaluation or overvaluation of assets, increasing risks for investors, banks, and regulatory authorities.
The research offers a new perspective on this issue through so-called successive indexing. Instead of predicting the absolute price of a property, this approach focuses on updating existing valuations over time. It tracks how the value of individual property characteristics—such as size, type, technical condition, or location—changes between two consecutive periods.
An interesting aspect of this approach is its ability to work with the heterogeneity of commercial real estate. Office buildings, industrial facilities, and retail spaces respond differently to market changes. Successive indexing enables capturing these differences and accounting for them when reassessing prices. The result is more realistic and nuanced value adjustments, rather than broad, often inaccurate corrections.
The practical applications of such an approach are wide-ranging. Banks can monitor risks in their loan portfolios more accurately, investors gain a better understanding of asset value dynamics, and public institutions can respond earlier to emerging market imbalances. Importantly, this model is relatively easy to use and does not require advanced technologies, thereby increasing its accessibility in practice.
The overall message of the research is clear: in the dynamic environment of commercial real estate, it is not enough to simply “estimate” value. We need tools that can continuously update values, reflect market structure, and reduce the risks associated with inaccurate valuation. Such approaches can strengthen both the stability and competitiveness of the real estate market.
Citation:
Tahotný, L., Suchý, V., Schönfeld, J., & Rózsa, Z. (2024). A novel approach to commercial property valuation: Successive term indexing and its competitive implications [Article]. Acta Montanistica Slovaca, 29(2), 500–512. https://doi.org/10.46544/AMS.v29i2.21
