THE VALUATION OF MODERN WAREHOUSES: INFLATION AND DEPRECIATION IMPLICATIONS

The inflation and depreciation assumptions implied within a traditional valuation should be exposed for consideration in an appraisal of a depreciation‐prone investment. Modern warehouses are examples of this type of investment. The all‐risks yield implies judgements concerning a long list of factors which affect the quality of an investment and its comparative appeal against alternatives such as gilt‐edged securities. An analysis for implicit growth is a starting point in an explicit appraisal. However, no account of depreciation is normally taken in the estimation of the growth implications. A combination of explicit growth and depreciation assumptions will enable an appraisal to be based upon a depreciated equated yield, the basis of the appraisal technique presented for consideration below.