Why Two Valuers Can Arrive at Different Market Rents
Simply, a property valuation is not an exact science. Even when two qualified valuers assess the same premises at the same date, they may arrive at different opinions of the current market rent. This does not necessarily mean that one valuation is right and the other wrong. The difference will often arise from the evidence obtained, the interpretation of that evidence, the professional judgment applied, and the current market conditions as at the date of valuation.
Market evidence is rarely identical
A valuer will ordinarily consider recent leasing transactions involving comparable properties to that of the subject premises. However, no two properties are identical. Differences may include:
- Location
- Building size, layout and street frontage
- The property’s condition and quality of improvements
- Carparking, accessibility or loading facilities
- Lease term, options and rent review provisions stated within the lease
- Incentives such as rent-free periods or landlord contributions
- The permitted use of the premises as stated within the lease; and lastly
- The date on which the lease was negotiated and date of review
Each valuer may select a different group of comparable rentals or place different weight on the available evidence available as at the date of valuation.
Face rent versus effective rent
One of the most common reasons for differing conclusions in the 2026 real estate market is the treatment of leasing incentives provided of which in Melbourne can now be up to 50% dependent on asset class.
A lease may record a relatively high face rent but also include a rent-free period, fitout contribution or other financial incentive. Once the value of that incentive is taken into account, the net effective rent may be considerably lower than the face rental.
A valuer relying primarily on face rentals may therefore reach a higher conclusion that a valuer who analyses the underlying effective rental position. It is important that rental evidence is considered on a consistent basis throughout i.e. “like with like” basis.
Adjustments to comparable properties
Comparable rental evidence generally requires some form of adjustment before it can be applied to the subject premises.
For example, a nearby shop may have superior frontage and exposure but be inferior in regard to the property’s state of repair. Another property may be substantially larger and therefore command a lower rental rate per square metre “economies of scale”. The extent of the adjustments made for these differences relies on the valuer’s experience and understanding of the particular market at a given point of time.
Different interpretations of market conditions
Market rent reflects conditions at a particular date. In a changing market, evidence agreed six or twelve months earlier may not accurately represent current sentiment occurring over the last three months.
One valuer may consider rents to be strengthening because of low vacancy and increased tenant demand. Another may place greater emphasis on current economic uncertainty, extended leasing periods or the level of incentives required to secure tenants.
The property’s characteristics and potential use
A property’s market rent is influenced by more than its floor area. Its layout, exposure, accessibility, zoning, permitted use and suitability for occupation can all affect tenant demand.
A valuer with specialist experience in a particular property type or retail precinct may identify factors that are not immediately apparent from the lease documentation or basic rental data. Local market knowledge can therefore materially influence the assessment.
The terms of the lease matter
When assessing market rent under an existing lease, the valuer must carefully consider the lease provisions and the assumptions applying to the review.
Depending on the lease and relevant legislation, the assessment may need to reflect matters such as:
- The “permitted use”
- The length of the remaining term
- The rent-review mechanism
- The allocation of outgoings gross or net
- Restrictions or advantages contained in the lease
- Improvements undertaken by the tenant. Disregarding Lessee fitout, “cold” or “warm” shell
- Obligations imposed on either party
Two valuers may interpret the practical effect of these provisions differently, particularly where the lease wording is complex.
Valuation methodology and professional judgment
Valuers may also adopt different analytical approaches. One may rely primarily on a rate per square metre, while another may place greater emphasis on the property’s overall rental, zoning, frontage or income-producing capacity.
The final assessment is not simply an average of comparable transactions. It requires the valuer to reconcile all available information and form a reasoned opinion. That reconciliation inevitably involves professional judgement.
A difference does not automatically indicate an error
A modest range between two rental assessments can be entirely reasonable. Market rent is generally better understood as falling within a supportable range rather than representing a single, indisputable figure.
However, a significant difference should be carefully examined. The parties should consider:
- Whether both valuers adopted the same valuation date
- Whether the same lease assumptions were applied
- The quality and relevant of the comparable evidence
- Whether incentives were properly analysed
- The adjustments made to the evidence
- Whether either valuer possesses specialist knowledge of the relevant property sector or location
The importance of a well-supported valuation
A credible rental valuation should clearly explain the evidence considered, the adjustments applied and the reasoning supporting the final conclusion. The figure alone is not enough – the strength of a valuation lies in the analysis behind it.
With more than 30 years of industry experience, First Valuation Group provides independent market-rental assessments across the commercial, retail and industrial property sectors. Our Certified Practising Valuers combine detailed market evidence with specialist local knowledge to deliver clear, well-reasoned and defensible valuation advice.
For assistance with a market rent review, rental determination or independent rental assessment, contact First Valuation Group for a confidential discussion.
To discuss any related property matter herein or other issues, please contact
Mark Ruttner, Managing Director
mr@fvg.com.au 0411 419 674
