Property cash flow studies : focusing on model consistency and data accuracy

The high degree of variability and inconsistency in cash flow study usage by property professionals demands improvement in knowledge and processes. Until recently limited research was being undertaken on the use of cash flow studies in property valuations but the growing acceptance of this approach for major investment valuations has resulted in renewed interest in this topic. Studies on valuation variations identify data accuracy, model consistency and bias as major concerns. In cash flow studies there are practical problems with the input data and the consistency of the models. This study will refer to the recent literature and identify the major factors in model inconsistency and data selection. A detailed case study will be used to examine the effects of changes in structure and inputs. The key variable inputs will be identified and proposals developed to improve the selection process for these key variables. The variables will be selected with the aid of sensitivity studies and alternative ways of quantifying the key variables explained. The paper recommends, with reservations, the use of probability profiles of the variables and the incorporation of this data in simulation exercises. The use of Monte Carlo simulation is demonstrated and the factors influencing the structure of the probability distributions of the key variables are outline. This study relates to ongoing research into functional performance of commercial property within an Australian Cooperative Research Centre.

A Method of Preparing Future Hourly Weather Data for the Study of Global Warming Impact on the Built Environment

The dynamic interaction between building systems and external climate is extremely complex, involving a large number of difficult-to-predict variables. In order to study the impact of global warming on the built environment, the use of building simulation techniques together with forecast weather data are often necessary. Since all building simulation programs require hourly meteorological input data for their thermal comfort and energy evaluation, the provision of suitable weather data becomes critical. Based on a review of the existing weather data generation models, this paper presents an effective method to generate approximate future hourly weather data suitable for the study of the impact of global warming. Depending on the level of information available for the prediction of future weather condition, it is shown that either the method of retaining to current level, constant offset method or diurnal modelling method may be used to generate the future hourly variation of an individual weather parameter. An example of the application of this method to the different global warming scenarios in Australia is presented. Since there is no reliable projection of possible change in air humidity, solar radiation or wind characters, as a first approximation, these parameters have been assumed to remain at the current level. A sensitivity test of their impact on the building energy performance shows that there is generally a good linear relationship between building cooling load and the changes of weather variables of solar radiation, relative humidity or wind speed.