RICS Knowledgebase

VPGA3 in the Global Red Book 2025 deals with Business valuations.

VPGA4 deals with trade related properties

VPGA6 deals with intangible assets

The Global Red Book 2025 VPGA 4 sets appropriate methods and considerations for the Valuation of individual trade related properties. In some circumstances the valuer may use the profits method of valuation for such properties. This method establishes a fair maintainable operating profit (FMOP), defined as follows:

‘…the level of profit, stated prior to depreciation and finance costs relating to the asset itself (and rent if leasehold), that the reasonably efficient operator (REO) would expect to derive from the fair maintainable turnover (FMT) based on an assessment of the market’s perception of the potential earnings of the property. It should reflect all costs and outgoings of the REO, as well as an appropriate annual allowance for periodic expenditure, such as decoration, refurbishment and renewal of the trade inventory.’

Where using the profits method of valuation in accordance with VPGA 4, individual considerations (e.g. temporary rates relief) should be considered in line with the above principle. If costs and outgoings would have reduced for the hypothetical REO, this can impact the calculation. Note also that it is the market’s perception of earnings of the property.

See also Pubic Houses valuation