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| In Defense of the Land Residual Theory
and the Absence of a Business Value Component for Retail Property Author: Norman G. Miller, Steven T. Jones, and Stephen E. Roulac Start Page: 203 Abstract: The temptation is
strong for arguing that property values can be broken down into land, improvements, and
business value, as only land and improvements are subject to property tax. As sympathetic
as the authors are to this motivation, the notion of a long-run business value component
for retail property is refuted and the land residual value theory reasserted, while at the
same time admitting the possibility of first owner entrepreneurial or development-based
value creation. It is argued that any excess property productivity will eventually become
attached to the land, and last that option values are an important aspect of land values
that would be affected when suggesting that the appropriate value of a given property is
the cost of substituting adjacent property. |
