This study investigates how real estate appraisers' sensory evaluations of office building façades influence property valuation. By identifying the latent factor structure underlying façade impressions and examining both their direct and indirect effects on appraisal values, this study empirically reveals appraisal professionals' tacit knowledge that has traditionally remained unquantified in property valuation practice.
The analysis focuses on office buildings in Tokyo held by Japanese Real Estate Investment Trusts (J-REITs) and appraised by professionals from Japan's largest real estate appraisal organisation. Multiple regression analysis is employed to compare property valuation models with and without façade sensory evaluation variables, while path analysis is used to identify the indirect effects of façade-related components, such as building colour, on property value.
Façade sensory evaluation significantly improves the explanatory power of property valuation models and influences property values at the 1% significance level. Among building attributes, the number of floors has the strongest effect on façade evaluation, followed by colour saturation, building age and brightness. Meanwhile, building colour indirectly affects property value through appraisers' façade evaluations.
By quantifying appraisers' tacit knowledge of façade impressions, this study clarifies sources of information asymmetry in property markets and highlights the importance of perceived building scale and colour in professional office property valuation.
Through path analysis that incorporates building colour, this study uniquely demonstrates how real estate appraisers' façade impressions structurally influence property value. In doing so, it extends existing research on façade design and property valuation.
