Commercial real estate appraisers are finding challenges assigning value to office properties due to massive uncertainty in the sector. According to Lucas Rotter, founder and CEO, of Valcre, "The pandemic has created additional complexities for commercial appraisers assigning value to office assets as uncertainty exists in the market." Destabilized occupancy and uncertainty around future office demand are at the heart of the challenges.

"Occupancy has yet to rebound to pre-pandemic levels, and renewed concerns about the Omicron variant are making remote work options increasingly attractive. As lease contracts expire in the coming years and renewals are up, it remains unclear what tenants' next move will be in regards to their office needs," Rotter tells GlobeSt.com. "Appraisers valuing office assets will have to account for these unknown factors and keep market-specific volatility top-of-mind."

Most appraisers evaluate multi-tenant office assets based on the assumption of a 10-year hold to give an accurate value. "This 10-year holding period accounts for volatility in the market or high tenant turnover that could occur in future years," says Rotter. "The net operating income of the 10-cash-flow-years is discounted back to present to conclude the value of the asset."