Adjusting Comparables for Size, Floor, Finish and Age, Step by Step

Raw comparables cannot be averaged. This is the order in which to adjust transactions onto a common basis so the resulting rent assumption is defensible.

Adjusting comparables means converting several different transactions into what each one implies for your specific unit, so that they can be read together. Without adjustment, a schedule simply averages apples, and the average moves whenever a different set of apples is collected. The sequence below keeps the adjustments visible and auditable, which matters more than any individual judgement inside it.

Before stage one

Adjustment is only as good as the underlying record, so complete the collection stage before you begin. You need the physical facts of each comparable and of your own unit, measured on a consistent basis, and you need the lease terms behind each transaction rather than a summary of the annual figure.

• A measured area for the subject unit and for each comparable on the same measurement basis.
• Floor level, aspect and access arrangement recorded for every line including the subject.
• A condition and finish note for each unit, ideally from a visit rather than a photograph.
• The lease terms behind each transaction: length, incentives, contributions and utility responsibility.
• A written statement of which unit you are valuing, since every adjustment is made towards it.

Stage 1: Fix the measurement basis

Decide whether you are working on net internal area, gross area or a stated leasable area, and apply it to every line including the subject. Mixing bases produces errors larger than any other adjustment you will make, because the difference between measurement conventions on an apartment with balconies and common circulation can be substantial. Where a comparable's area is reported rather than measured, mark it as such.

• Deliverable: A schedule with one measurement basis stated and applied, and reported areas flagged.
• Owner: Whoever assembles the schedule.
• Approval gate: No line proceeds to adjustment until its area basis is known or explicitly estimated.

Stage 2: Convert headline rents to effective rents

Spread any rent-free period, discount or landlord contribution across the committed term to produce an effective annual rent, and note the method you used so it can be reproduced. A unit let at a given rent with three months free on a two-year commitment is not comparable with one let at the same rent on standard terms. Do this before any physical adjustment, because it changes the number everything else is applied to.

• Deliverable: An effective rent column with the incentive and the spreading method shown for each line.
• Owner: Analyst with sight of the contracts.
• Approval gate: Every line shows either an effective rent or a note that terms were standard.

Stage 3: Adjust for size

Rent per square metre is usually not constant across unit sizes: smaller units frequently achieve a higher rate per square metre and a lower absolute rent, because the tenant pool is deeper and the fixed elements of a dwelling do not scale. Examine the relationship in your own evidence rather than assuming it, by plotting rate against area, then adjust comparables towards the subject's size band using what the evidence shows.

• Deliverable: A size adjustment per line with the supporting relationship shown from the schedule itself.
• Owner: Analyst.
• Approval gate: The size adjustment is derived from the evidence rather than applied as a standard percentage.

Stage 4: Adjust for floor, aspect and access

In a multi-storey building, floor level can cut either way: higher floors may command a premium for view and quiet, or a discount where lift provision is poor or reliability is doubtful. Aspect matters for solar gain and therefore cooling cost and comfort, and a unit facing a service area or a busy road differs from one facing a courtyard. Adjust each comparable towards the subject's position using pairs within your evidence where only floor or aspect differs.

• Deliverable: A floor and aspect adjustment supported, where possible, by a matched pair in the same building.
• Owner: Analyst with local input.
• Approval gate: Any adjustment larger than a modest percentage is justified by a specific pair or a stated reason.

Stage 5: Adjust for finish, furnishing and services

Finish standard, kitchen and bathroom quality, flooring, joinery, air conditioning type and whether the unit is furnished all move rent. Furnishing in particular carries both a rent premium and a cost, so note it rather than absorbing it into a general quality adjustment. Record whether utilities, cleaning, security or a service package are included in the rent, since an inclusive rent is a different product from an exclusive one.

• Deliverable: A finish and services adjustment per line, with furnishing shown separately from fit-out quality.
• Owner: Analyst, ideally after seeing the units.
• Approval gate: Furnished and unfurnished comparables are never compared without an explicit adjustment.

Stage 6: Adjust for age and condition

Age matters for rent through its effect on appearance, reliability and running cost, and it matters for your capital schedule through remaining plant life. Separate the two: adjust rent for how the building presents and performs today, and carry the consequences of age into the capital schedule rather than discounting the rent twice for the same fact.

• Deliverable: A condition adjustment on rent, with age-related capital consequences noted for the model.
• Owner: Analyst with the surveyor's observations.
• Approval gate: Age is not double counted in both the rent adjustment and the capital schedule.

Stage 7: Adjust for time

Where the letting market has moved since a transaction, adjust it to today. The honest way is to use pairs: the same unit or an identical unit let at two different dates, or a building where several units let across a period. Where no such pairs exist, state that you have made no time adjustment and weight recent evidence more heavily instead of inventing a growth rate.

• Deliverable: A time adjustment with its evidence, or an explicit statement that none was applied.
• Owner: Analyst.
• Approval gate: No time adjustment is applied from a forecast or a commentary rather than from transactions.

Stage 8: Weight the adjusted evidence and state a range

You now have a set of adjusted figures, each representing what that transaction implies for your unit. Weight them by how little adjustment each required: a comparable needing one small adjustment is worth more than one needing five large ones. Present the result as a range with a central view, and name the two lines that carry the most weight, because those are the ones a reviewer should test first.

• Deliverable: A weighted range with a central rent assumption and the two most influential lines identified.
• Owner: Analyst, signed off by whoever uses the number.
• Approval gate: The total adjustment on any line used heavily is visible and proportionate.

Handovers between stages

The schedule has two destinations: the income line of the model and the conversation with an accredited valuer or a lender. Both are better served by the adjusted schedule than by the single number it produces, so pass the whole workbook rather than the conclusion. When a valuer working through the Taqeem framework reaches a different figure, the useful comparison is adjustment by adjustment, since the disagreement almost always sits in one judgement rather than across the method.

How you know it is finished

The adjustment is complete when every line is on one measurement and one rental basis, every adjustment is stated with its reason, and the output is a range rather than a point. Keep the workbook, because in twelve months it becomes your own time evidence. Market evidence ages quickly, so treat any schedule older than a few months as a starting point to refresh rather than a current conclusion.

Domira builds the numbers on a Saudi property with you before you commit: rent and cost evidence, condition and capital expenditure, the appraisal and the sensitivities that decide whether the deal survives a bad year. The investment decision stays yours, and so does the advice of your licensed tax and legal advisers.