What’s it worth? The truth about park valuations

10th February 2010
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Richard Prestwich of Chartered Surveyors Charles F Jones LLP looks at the art of valuing a park

As a specialist Agent and Valuer the question I am most frequently asked is ‘how much is my park worth?’ Now, there may be many different reasons behind this question but often park owners hope to hear that the value of their park is higher than they had expected. In the peak of the market premiums were being paid for certain parks much to the delight of many park operators. However, with the state of the economy we are seeing Values and prices achieved returning to normality mainly driven by the banks being more demanding on loan to value and serviceability/sustainability.

Those park owners who don’t want to undertake a formal Valuation but are intrigued about the value of their park will often rely on a speculated per pitch rate to estimate the value of their park or a park they are interested in. This method can be very misleading - due to the complexity of the market place, only caravan park agents and a handful of specialist professionals have the ability to give accurate Valuations. At Charles F Jones, we have witnessed non-specialist commercial agents using the ‘price per pitch’ method resulting in valuations going horribly wrong due to their inexperience within this niche market, this was usually buffered by a rising market but not so today.

How values are derived – profit is prime

There are enough property programs on the TV for anyone to know how the price of residential property is formulated. Essentially, although there are some distinct differences, caravan park values are affected by similar variables. A park in a good location would obviously be worth more than a park in a poor location; in the same way, size affects value. The actual science behind valuing a caravan park is that the more profitable a park is, or can realistically become, the more that park will be worth.

Location, size and the condition of the property all contribute to making a park more valuable but only if these variables have the ability to positively affect profitability. In 99 per cent of cases if one park is more profitable - or thought to be able to become more profitable - than another, it will command a higher value.

So, primarily profitability is the key to value. Some may question this statement – often parks come to the market with unrealistic asking prices (priced above the perceived market value) and it begs the question that if a business is not performing to its potential – why? Common sense would indicate that the underperforming park is overpriced, and in certain situations this maybe the case. On occasion however, an astute purchaser will realise the investment potential which offsets the risk of purchasing an underperforming park.

Many Companies / Operators have benefitted from these types of investments however; it takes an excellent knowledge of the market place, money and a lot of nerve to make those investments work successfully.

Many park operators will look at their existing business and wonder how they can improve the value of their property. The answer is usually in improving the bottom line and quality of development. Through experience from visiting many parks, there are often simple steps to improve profitability - charging market value for pitches, quality marketing, good customer service and providing for your customers’ needs. These may be business basics but they are the building blocks for sustained profitability.

Richard Prestwich can be contacted on 01244 328141 or email richardp@cfj.co.uk.

RP/RBGH

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