At a time when the world property markets are experiencing the effects of the global recession, this paper examines the underlying basis of the valuation process. With reference to professional criticism in the United States of America, the United Kingdom and Australasia, the paper advocates a return to first principles in all appraisals and valuations, the value being determined by the interaction between the supply and demand criteria in any particular market.

A development project is characterised by many periods of negative cash flows followed by a relatively smaller number of cash surplus periods. Thus, because of the time value of money, a major risk in real estate development arises from events which extend the periods between the negative and positive cash flows. This paper reviews the traditional methods of evaluating development projects in this context and suggests that more detailed cash flow techniques should be adopted to allow greater flexibility in appraisals, thus accounting for changes in circumstances through sensitivity and scenario analysis. However, even where such techniques are used, developments should not be viewed in isolation and consideration must also be given to the feasibility of a scheme in a corporate framework.

Procedures for carrying out valuations for rent review purposes are re-cast in a contemporary approach with special attention paid to market structure, data compatibility and the effect of market distortions. A detailed analysis is presented of relevant aspects of the (Australian) case Broken Hill Pty Co Ltd v Australian Mutual Provident Society (BHP v AMP) which discloses illogicalities in valuation theory and practice in the tradition of the (English) case Segama NV v Penny Le Roy Ltd.

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. IntroductionIf we are to make informed investment decisions we need, among other things, to understand the nature and functioning of the physical environment within which funds are to be committed. It aids understanding if we can offer a rational answer to a question of profound significance posed in 1927 by Robert Murray Haig[1]: "Where do things belong in an urban area?"In attempting to answer that question, he proposed and developed the major elements of urban land use location theory that are valid to this day. Indeed, Ratcliff[2], in his restatement of Haig's theorizing, went so far as to claim that he "set forth concepts which are the very cornerstone of modern urban land economics" and that "[l]ater workers in the field of land economics have contributed little of theoretical value…"Haig commenced by regarding the establishment as the basic space user. He then examined its internal structure and the forces external to it which influence its location. To Haig, establishments are "packets of functions". The way in which a firm combines its constituent functions is one determinant of its location. Over time, an establishment may discard or relocate one or more of its functions. A legal firm, for example, may relocate its storage function and store its files elsewhere at less cost. As a site's locational characteristics change, such a separation of functions may take place so that the establishment may continue to maintain its presence there at a cost it can afford.Moving to external factors, he noted that, as one moves from the periphery of the city towards its centre, transport costs decrease but, as competition sets in for closer-in locations, site rents increase. In short, site rents and transport costs are complementary. In this process the firm which locates successfully outbids all others. Equivalently, uses locate according to their rent-paying ability -the latter determined in part by the way in which management combines the firm's functions at that location. In the process of interacting with other establishments, the costs of overcoming the distance separating them have to be