Valuation of urban industrial land using ANP

European Journal of Operational Research 185 (2008) 322–339
www.elsevier.com/locate/ejor
O.R. Applications
Valuation of urban industrial land: An analytic network

process approach
a,*
P. Aragonés-Beltrán , J. Aznar b, J. Ferrı́s-Oñate a, M. Garcı́a-Melón a
a
Department of Engineering Projects, Polytechnic University of Valencia, Camino de Vera s/n, 46022 Valencia, Spain
b
Department of Economy and Social Sciences, Polytechnic University of Valencia, Camino de Vera s/n, 46022 Valencia, Spain
Received 27 March 2006; accepted 26 September 2006

Available online 20 December 2006
Abstract
In this paper an application of the Analytic Network Process (ANP) to asset valuation is presented. It has two purposes:
solving some of the drawbacks found in classical asset valuation methods and broadening the scope of current approaches.
The ANP is a method based on Multiple Criteria Decision Analysis (MCDA) that accurately models complex environments.
This approach is particularly useful in problems which work with partially available data, qualitative variables and influences
among the variables, which are very common situations in the valuation context. As an illustration, the new approach has
been applied to a real case study of an industrial park located in Valencia (Spain) using three different models. The results
confirm the validity of the methodology and show that the more information is incorporated into the model, the more accu-
rate the solution will be, so the presented methodology stands out as a good alternative to current valuation approaches.
Ó 2006 Elsevier B.V. All rights reserved.
Keywords: Multiple criteria analysis; Pricing; ANP
1. Introduction
Asset valuation is an important issue in any country. It is necessary to estimate the value of the assets in
many economic events, such as expropriations, civil judgements, heritage divisions or mortgages. Because
of the increasing economic development of the countries, it becomes more and more necessary to make better
and more accurate valuations.
Classical asset valuation methods can be grouped into comparative methods and capitalisation methods.
Comparative methods estimate the value of the problem asset by comparison with other similar assets of
known value, called reference assets, which should have been used in recent transactions. The analysis is based
on the more significant attributes of the assets, also called explanatory variables. The most widely used
comparative methods are the synthetic methods (Ballestero and Romero, 1992), the econometric methods
*
Corresponding author. Tel.: +34 96 387 9860; fax: +34 96 387 9869.
E-mail addresses: aragones@dpi.upv.es (P. Aragonés-Beltrán), jaznar@esp.upv.es (J. Aznar), jaferoa@upvnet.upv.es (J. Ferrı́s-Oñate),
mgarciam@dpi.upv.es (M. Garcı́a-Melón).
0377-2217/$ - see front matter Ó 2006 Elsevier B.V. All rights reserved.
doi:10.1016/j.ejor.2006.09.076
P. Aragonés-Beltrán et al. / European Journal of Operational Research 185 (2008) 322–339 323
(Murray, 1969) and the Beta method (Ballestero, 1973). The main advantage of these techniques is their easy
implementation. However, they do not work well with qualitative explanatory variables and they require
knowing the price of recent transactions of the reference assets, as well as the quantification of the explanatory
variables that justify this price, something that is not always possible in practice. Moreover, the synthetic
methods and the Beta method estimate different values for a given asset, one for each explanatory variable
under consideration, so it becomes difficult to decide how to combine them in order to calculate a single value.
In addition to that, in the synthetic methods the values are proportional to the variable under consideration,
which leads to inaccurate results.
In capitalisation methods, the value of the problem asset is determined by upgrading the future cash flows
that can be generated by the asset to a present value. This presents two drawbacks: forecasting future infor-
mation and determining the capitalisation rate.
These drawbacks of the classical valuation approaches have led researchers to develop new alternative
methods which perform well in common valuation contexts, for which only partial information is available
and qualitative explanatory variables are used. These new approaches are based on Multiple Criteria Decision
Analysis (MCDA). The expression MCDA is used as an umbrella term to describe a collection of formal
approaches which seek to take explicit account of multiple criteria in helping individuals or groups explore
decisions that matter (Belton and Stewart, 2002). More information about MCDA can be found in Pomerol
and Barba-Romero (1997), Belton and Stewart (2002) and Figueira et al. (2005).
Some MCDA methods, such as Diakoulaki’s method (Diakoulaki et al., 1992), Goal Programming (Char-
nes and Cooper, 1961) and the Analytic Hierarchy Process (AHP) (Saaty, 1980), have been already applied to
the asset valuation (Aznar and Guijarro, 2004, 2007, in press; Aznar and Caballer, 2005). The purpose of this
research is to go a step further by applying the Analytic Network Process (ANP) (Saaty, 2001) to valuation
problems, in particular to the valuation of urban industrial land as an illustration. This paper also contributes
to the valuation of this kind of assets by providing a detailed list of the explanatory variables of urban indus-
trial land. Previous works (Kowalski and Paraskevopoulos, 1990; McGrath, 2000) have already estimated the
value of urban industrial land using classical valuation methods, but they have not studied the explanatory
variables of urban industrial land as extensively as this work does.
The rest of the paper is organised as follows. Firstly, Section 2 introduces the analytic network process.
Then, Section 3 describes the new approach for the valuation of urban industrial land and Section 4 presents
a real case study for methodology validation. Finally, Section 5 presents the main conclusions derived from
this research and future works.
2. Background of AHP and ANP
The Analytic Hierarchy Process (AHP) and the Analytic Network Process (ANP) are two methods pro-
posed by Saaty (1980, 2001). AHP is a well known technique that decomposes a decision making problem into
several levels in such a way that they form a hierarchy with unidirectional hierarchical relationships between
levels. The top level of the hierarchy is the overall goal of the decision problem. The following lower levels are
the tangible and/or intangible criteria and subcriteria that contribute to the goal. The bottom level is formed
by the alternatives to evaluate in terms of the criteria. The AHP uses pairwise comparison to allocate weights
to the elements of each level, measuring their relative importance by using Saaty’s 1-to-9 scale, and finally cal-
culates global weights for assessment at the bottom level. The method also calculates a consistency ratio (CR)
to verify the coherence of the judgements, which must be about 0.10 or less to be accepted. Mathematical
foundations of the AHP can be found in Saaty (1994, 1996).
AHP is conceptually easy to use, however its strict hierarchical structure cannot handle the complexities of
many real world problems. As a solution, Saaty proposed the ANP, the general form of the AHP. The ANP
represents a decision making problem as a network of criteria and alternatives (all called elements), grouped
into clusters. All the elements in the network can be related in any possible way, i.e. a network can incorporate
feedback and interdependence relationships within and between clusters. This provides a more accurate mod-
elling of complex settings. The influence of the elements in the network on other elements in that network can
be represented in a supermatrix. This new concept consists of a two-dimensional element-by-element matrix
which adjusts the relative importance weights in individual pairwise comparison matrices to build a new
324 P. Aragonés-Beltrán et al. / European Journal of Operational Research 185 (2008) 322–339
overall supermatrix with the eigenvectors of the adjusted relative importance weights. According to Saaty
(2001), the ANP comprises five main steps:
(i) Conducting pairwise comparisons on the elements.

(ii) Placing the resulting relative importance weights (eigenvectors) in pairwise comparison matrices within
the supermatrix (unweighted supermatrix).
(iii) Conducting pairwise comparisons on the clusters.
(iv) Weighting the blocks of the unweighted supermatrix, by the corresponding priorities of the clusters, so
that it can be column stochastic (weighted supermatrix).
(v) Raising the weighted supermatrix to limiting powers until the weights converge and remain stable (limit
supermatrix).
Some of the most recent applications of ANP to decision making problems have been: prioritising and
designing rule changes for the game of soccer (Partovi and Corredoira, 2002), warehouse location for Digital
Equipment Corporation (Sarkis and Sundarraj, 2002), contractor selection (Cheng and Li, 2004), acquisition
of new machine tools in a company (Yurdakul, 2004), financial crisis forecasting (Niemira and Saaty, 2004),
choice of best management alternative of the supply chain in a company (Agarwal et al., 2006), determination
of appropriate energy policies (Haktanirlar, 2005), selection of best actuation for end-of-life computers (Ravi
et al., 2005), product mix planning (Chung et al., 2005) and evaluation of alternative fuels for residential heat-
ing (Erdoğmusß et al., 2006). ANP applications to Asset Valuation have not been reported yet, so this paper
tries to fill that gap in the literature.
We have adopted an ANP-based valuation approach for the following reasons: (i) asset valuation is a mul-
ticriteria decision problem, (ii) some valuation criteria are intangible and therefore difficult to solve by the clas-
sical valuation methods and (iii) interdependences among explanatory variables and between explanatory
variables and the assets may exist.
3. ANP-based methodology for the valuation of urban industrial land
3.1. Problem formulation
The first step is to collect as much information as possible in order to gain sound knowledge of the valuation
problem. This information consists of: applicant and purpose of valuation, description and location of the plot
to valuate and analysis of the plot environment (industrial park where the plot is located and municipality).
3.2. Selection of the reference assets
The application of ANP to asset valuation requires a prior adaptation of the multicriteria vocabulary to
common use valuation terminology. This means that in valuation context the term ‘‘criterion’’ is replaced
by ‘‘explanatory variable’’ and that the ‘‘alternatives’’ are referred to as ‘‘assets’’.
Reference assets are assets similar to the problem asset that allow for comparison and determination of
market value. Similarity to the problem asset is a very important issue when selecting the reference assets.
They should have been object of recent transactions and their price has to be known.
3.3. Selection of the explanatory variables
Explanatory variables are variables that justify or explain the price of a given asset. They are chosen
depending on the characteristics of the reference assets and on their similarity to the problem asset. It is nec-
essary to have enough information about the explanatory variables so as to allow for comparison between the
reference assets and the problem asset.
With the purpose of facilitating variable selection, a guiding list of explanatory variables that influence the
price of urban industrial land, classified according to the referencing item (plot, industrial park or environ-
ment), is provided in Appendix 1.
3.4. Representation of the valuation problem as a network
The complex task of representing the valuation problem as a network of interdependent elements distribu-
ted into clusters can be decomposed into the following steps: (i) to identify the elements (assets and explana-
tory variables), (ii) to group them into clusters and (iii) to determine the influences on each other.
3.5. Prioritisation of the assets using ANP
The ANP concept of supermatrix will be used to prioritise and weight the reference assets and the problem
asset. Their overall priorities will be obtained from the limit supermatrix.
3.6. Determination of the value/weighting ratio
The value/weighting ratio compares the weight of the problem asset with its market value. This ratio can be
calculated as the quotient of the sum of all the market values of the reference assets, known by the valuator,
and the sum of all their weights, obtained with the ANP.
3.7. Calculation of the problem asset value
The problem asset value can be calculated by multiplying the value/weighting ratio by the problem asset
weight. The valuator will have to analyse if this value is reasonable in order to decide whether to accept or
reject it. If rejected, all the steps followed in the procedure must be revised.
4. Case study
4.1. Problem formulation
The problem plot is located in the industrial park Cotes B, in the municipality of Algemesı́ (Valencia,
Spain), whose acting body is the Sociedad de Promoción y Equipamiento de Suelo (SEPES), dependent of
the Spanish Ministerio de Vivienda. It is an industrial park with good road accesses: it has a direct exit to road
CV-42 and has good access to motorway AP-7.
We possess precise, complete and updated information of the sales prices and characteristics (explanatory
variables) of all plots in the industrial park, which are comparable as it is a new park. The industrial park
consists of 151 plots, classified into three categories according to the plot area required for an industry:
small (between 600 and 1500 m2), medium (between 1500 and 3000 m2) and large (more than 3000 m2).
The sales price of the plots, established by SEPES, is: 105 €/m2 for small industries, 95 €/m2 for medium size
industries and 85 €/m2 for large industries. In addition, there is an increment of 3 €/m2 for corner plots and of
6 €/m2 for plots facing the motorway, independently of plot area. The problem asset is plot 140-B, marked in
Fig. 1.
4.2. Selection of the reference plots and the explanatory variables
As both items are closely related, they will be solved simultaneously. The reference plots will be chosen
from the same industrial park as the problem plot. Some explanatory variables that can justify price differ-
ences among the plots are: (i) plot area, (ii) corner or front-side position, (iii) position facing AP-7 motorway,
(iv) proximity to the industrial park exit by road CV-42, (v) proximity to common facilities and (vi) proximity
to green areas. The first three explanatory variables have been used by SEPES to determine the sales price of
the plots and the other three variables have been included in this study because they can also influence plot
price. The six variables have been grouped as shown in Table 1.
Four reference plots were selected (Fig. 1), which differ from the problem plot in the explanatory variables
under consideration. Table 2 presents the main characteristics of the reference and problem plots.
Fig. 1. Industrial park Cotes B in Algemesı́ (Valencia, Spain).
Table 1
Explanatory variables under consideration
1. Plot characteristics (EV1) 2. Plot location in the industrial park (EV2)
1.1. Plot area (EV11) 2.1. Proximity to industrial park exit (EV21)
1.2. Corner position (EV12) 2.2. Proximity to common facilities (EV22)
2.3. Proximity to green areas (EV23)
2.4. Plot position facing motorway (EV24)
Table 2
Characteristics of the reference and problem plots
Plot Plot area (m2) Corner position Facing motorway Plot unit value (€/m2) Plot value (€)
47-B 1970.11 No No 95 187,160.45
98-B 6653.98 No Yes 85 + 6 605,512.18
16-B 604.19 No No 105 63,439.95
10-B 3747.81 Yes No 85 + 3 329,807.28
140-B 2038.62 No No 95 193,668.90
Note: Plot values are estimated using SEPES criteria.
4.3. Resolution of the valuation problem
The valuation problem has been solved using three different models, in which the network has been pro-
gressively enriched with additional data so as to analyse the effects of new information on the problem plot
value. The value obtained will be compared to the real value (193,668.90 €). All models have been solved using
Super Decisions v1.6.0. software (www.superdecisions.com).
4.3.1. Model 1
Model 1 (Fig. 2) is the simplest network we can build. It consists of two clusters: one of explanatory vari-
ables relative to plot characteristics (EV1) and one of assets (four reference assets plus the problem asset).
Plot characteristics (EV1) Assets

Plot area (EV11) 47-B 10-B
Corner position (EV12) 98-B 140-B
16-B
Fig. 2. Model 1.
The two-sense arrow indicates mutual influence between clusters. On one hand, explanatory variables influ-
ence on plot price, so the valuator must weight the explanatory variables in order to estimate their contribu-
tion to the price of each plot. On the other hand, inverse influence means that the valuator must weight the
plots in order to measure their dominance with respect to each explanatory variable, because the larger the
area the higher the plot price and there is an extra cost for corner plots. Appendix 2 shows all the pairwise
comparison matrices generated in this model, including the corresponding importance weights (eigenvectors)
and consistency ratios (CR).
Upon completion of all pairwise comparison matrices, the unweighted supermatrix is built (Table 3). As the
network is formed by two clusters and there are no feedbacks, the unweighted supermatrix is column stochas-
tic and coincides with the weighted supermatrix. The limit supermatrix (Table 4) can be obtained by raising the
weighted supermatrix to limiting powers until the weights converge and remain stable. Overall plot priorities
can be obtained from the limit supermatrix and can be used to calculate the problem plot value (Table 5).
The value obtained in Model 1 (189,857.24 €), which considers only SEPES criteria, closely approaches the
real value of the problem plot (193,668.90 €). This result validates the methodology and shows that it performs
well when using quantified known data. In the next model, the network will be enriched with qualitative explan-
atory variables.
4.3.2. Model 2
Model 2 (Fig. 3) adds four explanatory variables, not considered by SEPES, that could also justify the value
of the plots. The new variables refer to plot location in the industrial park. The exact distances from the plots
to the four selected locations are unknown, so they will be qualitatively estimated from Fig. 1.
Table 3
Unweighted/weighted supermatrix in Model 1
EV1 Assets
EV11 EV12 47-B 98-B 16-B 10-B 140-B
EV1 EV11 0 0 0.900 0.900 0.900 0.875 0.900
EV12 0 0 0.100 0.100 0.100 0.125 0.100
Assets 47-B 0.135 0.167 0 0 0 0 0
98-B 0.430 0.167 0 0 0 0 0
16-B 0.045 0.167 0 0 0 0 0
10-B 0.255 0.333 0 0 0 0 0
140-B 0.135 0.167 0 0 0 0 0
Table 4
Limit supermatrix in Model 1
EV1 Assets
EV11 EV12 47-B 98-B 16-B 10-B 140-B
EV1 EV11 0.447 0.447 0.447 0.447 0.447 0.447 0.447
EV12 0.053 0.053 0.053 0.053 0.053 0.053 0.053
Assets 47-B 0.069 0.069 0.069 0.069 0.069 0.069 0.069
98-B 0.201 0.201 0.201 0.201 0.201 0.201 0.201
16-B 0.029 0.029 0.029 0.029 0.029 0.029 0.029
10-B 0.132 0.132 0.132 0.132 0.132 0.132 0.132
140-B 0.069 0.069 0.069 0.069 0.069 0.069 0.069
Table 5
Problem plot value calculation in Model 1
Asset Supermatrix weight Normalised weight Value (€) Ratio Plot 140-B value (€)
47-B 0.069 0.138 187,160.45 1,375,777.10 189,857.24
98-B 0.201 0.402 605,512.18
16-B 0.029 0.058 63,439.95
10-B 0.132 0.264 329,807.28
140-B 0.069 0.138
Plot location in the industrial park (EV2)

Plot characteristics (EV1)
Proximity to industrial park exit (EV21)
Plot area (EV11) Assets
Proximity to common facilities (EV22)
Corner position (EV12) 47-B 10-B
Proximity to green areas (EV23)
98-B 140-B
Plot position facing motorway (EV24)
16-B
Fig. 3. Model 2.
The two-sense arrow between the new cluster and the asset cluster indicates mutual influence. On one hand,
the valuator must weight the new explanatory variables in order to estimate their contribution to the price of
each plot. On the other hand, the valuator must weight the plots in order to measure their dominance with
respect to each new explanatory variable, because the plots closest to the mentioned locations should be more
expensive as they involve a number of advantages. Feedback means that there is influence among the internal
elements of the cluster, as it is not possible to be close to the four sites at the same time. The valuator must also
weight the influence among explanatory variables. Appendix 3 shows the pairwise comparison matrices gen-
erated in this model, including the corresponding importance weights and consistency ratios. The comparison
matrices of Model 1 that repeat in Model 2 have not been included. Upon completion of all pairwise compari-
son matrices, the unweighted supermatrix is built (Table 6).
Let us suppose now that the two clusters of explanatory variables have the same influence on the asset clus-
ter, a weight each of 0.5, and that the feedback and the asset cluster also have the same influence on the cluster
of explanatory variables ‘‘Plot location in the industrial park’’ (EV2), a weight each of 0.5 too. Then, weighting
the blocks of the unweighted supermatrix by the corresponding priorities of the clusters, we obtain the
weighted supermatrix, which is column stochastic (Table 7). The limit supermatrix is shown in Table 8. Prob-
lem plot value calculation in Model 2 is shown in Table 9.
Table 6
Unweighted supermatrix in Model 2
EV1 EV2 Assets
EV11 EV12 EV21 EV22 EV23 EV24 47-B 98-B 16-B 10-B 140-B
EV1 EV11 0 0 0 0 0 0 0.900 0.900 0.900 0.875 0.900
EV12 0 0 0 0 0 0 0.100 0.100 0.100 0.125 0.100
EV2 EV21 0 0 0 0.778 0.091 0.111 0.462 0.462 0.462 0.462 0.462
EV22 0 0 0.778 0 0.091 0.111 0.231 0.231 0.231 0.231 0.231
EV23 0 0 0.111 0.111 0 0.778 0.077 0.077 0.077 0.077 0.077
EV24 0 0 0.111 0.111 0.818 0 0.231 0.231 0.231 0.231 0.231
Assets 47-B 0.135 0.167 0.364 0.200 0.100 0.125 0 0 0 0 0
98-B 0.430 0.167 0.182 0.100 0.400 0.500 0 0 0 0 0
16-B 0.045 0.167 0.182 0.400 0.100 0.125 0 0 0 0 0
10-B 0.255 0.333 0.182 0.200 0.200 0.125 0 0 0 0 0
140-B 0.135 0.167 0.091 0.100 0.200 0.125 0 0 0 0 0
Table 7
Weighted supermatrix in Model 2
EV1 EV2 Assets
EV1 EV11 0 0 0 0 0 0 0.450 0.450 0.450 0.438 0.450
EV12 0 0 0 0 0 0 0.050 0.050 0.050 0.063 0.050
EV2 EV21 0 0 0 0.389 0.045 0.056 0.231 0.231 0.231 0.231 0.231
EV22 0 0 0.389 0 0.045 0.056 0.115 0.115 0.115 0.115 0.115
EV23 0 0 0.056 0.056 0 0.389 0.039 0.039 0.039 0.039 0.039
EV24 0 0 0.056 0.056 0.409 0 0.115 0.115 0.115 0.115 0.115
Assets 47-B 0.135 0.167 0.182 0.100 0.050 0.063 0 0 0 0 0
98-B 0.430 0.167 0.091 0.050 0.200 0.250 0 0 0 0 0
16-B 0.045 0.167 0.091 0.200 0.050 0.063 0 0 0 0 0
10-B 0.255 0.333 0.091 0.100 0.100 0.063 0 0 0 0 0
140-B 0.135 0.167 0.045 0.050 0.100 0.063 0 0 0 0 0
Table 8
EV1 EV2 Assets
EV1 EV11 0.179 0.179 0.179 0.179 0.179 0.179 0.179 0.179 0.179 0.179 0.179
EV12 0.021 0.021 0.021 0.021 0.021 0.021 0.021 0.021 0.021 0.021 0.021
EV2 EV21 0.142 0.142 0.142 0.142 0.142 0.142 0.142 0.142 0.142 0.142 0.142
EV22 0.109 0.109 0.109 0.109 0.109 0.109 0.109 0.109 0.109 0.109 0.109
EV23 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063
EV24 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086
Assets 47-B 0.073 0.073 0.073 0.073 0.073 0.073 0.073 0.073 0.073 0.073 0.073
98-B 0.133 0.133 0.133 0.133 0.133 0.133 0.133 0.133 0.133 0.133 0.133
16-B 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055
10-B 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088
140-B 0.051 0.051 0.051 0.051 0.051 0.051 0.051 0.051 0.051 0.051 0.051
Table 9
47-B 0.073 0.182 187,160.45 1,359,999.84 174,079.98
98-B 0.133 0.332 605,512.18
16-B 0.055 0.138 63,439.95
10-B 0.088 0.220 329,807.28
140-B 0.051 0.128
The value obtained in Model 2 (174,079.98 €) is 10% lower than the real value given by SEPES
(193,668.90 €). The reason for this difference is that this model includes explanatory variables not considered
by SEPES. Plot 140-B is close to green areas, but far from common facilities and from the industrial park exit,
better valued explanatory variables than proximity to green areas. As a consequence, the plot should be sold
cheaper as it is worse located than the reference plots. This result makes sense and shows that the new
approach performs also well when using qualitative and/or unknown variables, one of the drawbacks found
in classical asset valuation methods. Model 3 changes cluster prioritisation.
4.3.3. Model 3
The network in Model 3 is equal to Model 2 (Fig. 3), thus the pairwise comparison matrices (Appendix 3)
and the unweighted supermatrix (Table 6) are also equal. In this model we will consider that the cluster of
explanatory variables ‘‘Plot characteristics’’ (EV1) has a much greater influence on the asset cluster than
the cluster of explanatory variables ‘‘Plot location in industrial park’’ (EV2), so the weight assigned to the for-
mer cluster will be 0.9 and to the latter 0.1. Then, by adjusting the unweighted supermatrix we obtain the
weighted supermatrix (Table 10). The limit supermatrix is shown in Table 11 and problem plot value calcu-
lation in Model 3 is shown in Table 12.
Again, the value obtained in Model 3 (186,672.57 €) is cheaper, as the problem plot presents a worse loca-
tion in the industrial park than the other reference plots, but now the estimated value is closer to the real value
(193,668.90 €) than in Model 2. The explanation of this is that the variables considered by SEPES (EV1) were
Table 10
Weighted supermatrix in Model 3
EV1 EV2 Assets
EV1 EV11 0 0 0 0 0 0 0.810 0.810 0.810 0.787 0.810
EV12 0 0 0 0 0 0 0.090 0.090 0.090 0.113 0.090
EV2 EV21 0 0 0 0.389 0.045 0.056 0.046 0.046 0.046 0.046 0.046
EV22 0 0 0.389 0 0.045 0.056 0.023 0.023 0.023 0.023 0.023
EV23 0 0 0.056 0.056 0 0.389 0.008 0.008 0.008 0.008 0.008
EV24 0 0 0.056 0.056 0.409 0 0.023 0.023 0.023 0.023 0.023
Assets 47-B 0.135 0.167 0.182 0.100 0.050 0.063 0 0 0 0 0
98-B 0.430 0.167 0.091 0.050 0.200 0.250 0 0 0 0 0
16-B 0.045 0.167 0.091 0.200 0.050 0.063 0 0 0 0 0
10-B 0.255 0.333 0.091 0.100 0.100 0.063 0 0 0 0 0
140-B 0.135 0.167 0.045 0.050 0.100 0.063 0 0 0 0 0
Table 11
EV1 EV2 Assets
EV1 EV11 0.383 0.383 0.383 0.383 0.383 0.383 0.383 0.383 0.383 0.383 0.383
EV12 0.046 0.046 0.046 0.046 0.046 0.046 0.046 0.046 0.046 0.046 0.046
EV2 EV21 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034
EV22 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026
EV23 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015
EV24 0.020 0.020 0.020 0.020 0.020 0.020 0.020 0.020 0.020 0.020 0.020
Assets 47-B 0.070 0.070 0.070 0.070 0.070 0.070 0.070 0.070 0.070 0.070 0.070
98-B 0.185 0.185 0.185 0.185 0.185 0.185 0.185 0.185 0.185 0.185 0.185
16-B 0.035 0.035 0.035 0.035 0.035 0.035 0.035 0.035 0.035 0.035 0.035
10-B 0.121 0.121 0.121 0.121 0.121 0.121 0.121 0.121 0.121 0.121 0.121
140-B 0.065 0.065 0.065 0.065 0.065 0.065 0.065 0.065 0.065 0.065 0.065
Table 12
47-B 0.070 0.147 187,160.45 1,372,592.43 186,672.57
98-B 0.185 0.388 605,512.18
16-B 0.035 0.074 63,439.95
10-B 0.121 0.255 329,807.28
140-B 0.065 0.136
Table 13
Summary of the results
Model Estimated value (€) Real value (€) Difference
(€) (%)
1 189,857.24 193,668.90 3,811.66 1.97
2 174,079.98 19,588.92 10.12
3 186,672.57 6,996.33 3.61
assigned higher weights, which partially eliminates the influence of the new variables (EV2). Model 3 shows
that the approach presented in this paper allows a more accurate estimation of the plot price in the industrial
park under study considering both quantitative and qualitative explanatory variables and respecting the
higher importance assigned by SEPES to the variables relative to plot characteristics (EV1).
4.4. Determination of the end value of the problem plot
The differences between the problem plot values obtained with the models and the real plot value have been
analysed and explained in detail in previous sections. Therefore, the valuator can estimate the end value of the
plot based on the explanatory variables and the relationships under consideration. Table 13 summarises the
results obtained.
5. Conclusions
Asset valuation is becoming more and more important due to the increasing number of economic events
and to the great variety of assets involved. The so-called classical asset valuation methods are not able to meet
current valuation needs because they present some problems: they are not suitable for use with qualitative
variables or when few data are available. With the purpose of offering solutions to such drawbacks, and of
broadening the scope of current approaches, a new research line incorporates some methods from Multiple
Criteria Decision Analysis (MCDA) to asset valuation with interesting results.
Within this research line, in this paper an application of the Analytic Network Process (ANP) to the val-
uation of urban industrial land is presented. The ANP allows the incorporation of qualitative explanatory
variables to the model and the organisation of the valuator’s judgements for further mathematical data pro-
cessing. It also allows interdependences between the explanatory variables and the assets, and among the
explanatory variables. If no interdependence exists, AHP, as a particular form of ANP, is also valid.
From the results obtained in this work we can conclude that MCDA techniques are suitable tools for asset val-
uation, as they allow overcoming the drawbacks found in classical asset valuation methods. Moreover, the new
methodology presented here is a good alternative to current urban industrial land valuation approaches. Although
the new proposal has been specifically applied to the valuation of a particular kind of assets, this tool can be
adapted to any type of assets, provided the explanatory variables and reference assets be correctly identified.
Beyond the scope of this work is the formulation of a more complex network, containing more interdepen-
dent elements and clusters, to accurately estimate the value of the problem plot. This study could also compare
the plot to valuate with other plots located in other industrial parks in the same region or even in other
regions. These tasks constitute very promising future research lines in the field of valuation, a field of increas-
ing interest which is incorporating models and methods commonly used in other disciplines and research areas
with successful results.
Acknowledgements
We would like to thank the R + D + i Linguistic Assistance Office at the Polytechnic University of Valencia
for their help in translating this paper.
This work lies within the R&D project ‘‘Design and implementation of a new methodology for asset valuation
through Multiple Criteria Decision Analysis techniques (GV05/246)’’, approved by the Generalitat Valenciana.
Appendix 1
332
A. Characteristics – Plot location in the industrial park – Facilities, infrastructures and situation of the works
of the plot – Total plot area (according to the documents and – Location of common services and connections
checked)
– Useful building area – Proximity to common facilities and green areas
– Plot shape and dimensions – Parking areas, green areas, roads and/or storehouses in the
P. Aragonés-Beltrán et al. / European Journal of Operational Research 185 (2008) 322–339

plot
– Corner or front plot – Visibility of the plot
– Maximum allowed building height and floors – Existence and conditions of walls and/or fences
– Plot elevation on sea level – Existence and conditions of paving
– Topographic characteristics of the plot – Existence of buildings: conditions, real and apparent age and
built area
– Physical, chemical, geological and mechanical – Urban land qualification
characteristics of the plot
– Land pollution – Legal situation: tenement, leasing, registration
– Number of border plots – Presence of archaeological remains of cultural interest in the
plot
– Morphology and conditions of the foundations – Possibility of advertising from motorway
in the nearby buildings
– Number of exits to road system – Distance to other properties of the potential buyer
– Accessibility of the plot and proximity to the
communications network
B. Characteristics B.1. B.1.1. Energy resources – Availability, adequacy, quality and cost of power supply
of the industrial Infrastructures – Availability, adequacy, quality and cost of lighting power supply
park – Availability, adequacy, quality and cost of fuel supply
– Availability, adequacy, quality and cost of coal supply
– Availability, adequacy, quality and cost of natural gas supply
B.1.2. Water supply and – License holder, adequacy, quality, supply, storage and cost of
disposal fresh water supply
– Availability of alternative water supply resources
– Proximity to rivers or to sea
– Local water policies
– Sewage and runoff treatment systems
– Water treatment and purifying systems
B.1.3. Fire control – Adequacy of the hydrant systems – Monitoring the accomplishment
of the regulations
– Public piping or water tanks for – Fire insurance
pressurised water supply
– Adequacy of fire control system and – Collaboration of nearby
personnel communities
in case of a serious accident

– Fire control regulations
B.1.4. Waste – Presence and location of dumps
– Adequacy, quality, license holder and cost of waste disposal services
– Availability of toxic and hazardous waste treatment services
– Public waste disposal policies
B.1.5. Roads – Presence, quality and conditions of the roads
– Road paving
– Availability and quality of related facilities: car park,
green areas, lighting, etc.
B.1.6. Telecommunications – Availability and quality of telephone services
– Telephone fares
– Possibility to adapt the telephone service
to the company’s needs
B.2. B.2.1. Culture and leisure – Recreational areas and restaurants – Incentives for the construction
Facilities of entertainment centres
– Sports facilities – Shopping facilities
B.2.2. Education – Number and facilities of educational centres
(schools, adult training centres, etc.)
– Offer and adequacy of training programmes
– Full-time training, recycling and specific courses
B.2.3. Other facilities – Health care services – Mail and delivery systems
– Bank services – Control systems, security alarms
and other security systems
– Accommodation services – Urban transportation services
– Religious services – Personnel transportation services
– Smell, fume, noise and vibration security systems – Passenger transportation services
(continued on next page)
333
334
Appendix 1 (continued)
B.3. – Availability and quality of road accesses – Quality of interurban communications
Communications – Availability and quality of train services – Transportation fares and tolls
– Availability and quality of plane services – Transportation fuel price policy
– Availability and quality of maritime services – Seasonal characteristics of
transportation systems

– Availability and quality of river services
B.4. Legislation – Urban planning: land use, land aggregation and segregation, car parks, storehouses, green
areas, roads, constructability coefficient, setoff, allowed height and number of floors, yards,
basements, fire security system, gaseous waste, sewage, hazardous waste, noise, vibrations,
aesthetics
– Legal features of the company: size, typology of manufactured goods, impact.
B.5. Other – Land availability in the industrial park – Provision of future growth
features – Proximity to a technologic park or R&D centres – Possibility of land investments
– Traffic problems – Land revaluation
– Distance to top management residence
C. Environmental C.1. Weather – Adequacy of weather conditions – Frequency and permanence of snow
characteristics and and ice
environmental – Temperature range in the region – Seismic risks
factors – Suitable relative humidity – Landslide risks
– Rain patterns and flood risks – Risk of severe climatic conditions
– Wind pattern and hurricane risks
C.2. Social – Type of urban nucleus – Possibility for personnel to train and
situation recycle
– Dominant activity – Health care and social standards
– Population and density – Police and fire men
– Cultural standard – Bank services
– Attitude of the population against settlement of – Religious services
new industries
– Attitude of local political, religious and social – Sports centres
authorities
against the industry
– Presence of residential houses – Shopping centres
– Urban transportation – Hotels and restaurants
– Educational centres – Cultural offer: cinemas, theatres,
concert halls,. . .
C.3. Market – Distance and access to market – Market loyalty
– Consumption rate of nearby markets – Market competitiveness
C.4. Tax factors – Tax regulation – Tax incentives to industry
– Income tax regulation – Public deficit
– Heritage tax regulation
C.5. Financing – Attitude of financing entities to industrial support
system – Access to official or private credits
– Price of money and financial services
C.6. Labour, – Labour task force background – Attitude to qualified training

work and wages – Availability of labour task force – Attitude to leadership at work
– Qualification and specialisation of task force – Young people unemployment and attitude of the
young people to work
– Professionality – Female personnel and women attitude to work
– Conflicts and labour accidents – Presence of trade unions
– Working conditions and costs – Availability of top managers, scientists and qualified
technicians
– Labour regulations – Prestige and potential of managers and officers
– Total employment and unemployment
by economic sectors
– Labour attitude against technological changes
C.7. Raw – Distance to possible sources of raw materials – Guarantee of raw material supply
materials – Number of supply points – Characteristics of raw material delivery systems
C.8. Attitude of – Support plans to industrial sectors and companies – Industrial diversity
official bodies – Industrial promotion planning – Protection to unemployment
C.9. Business – General evolution of companies and industrial – Migrating movements of industrial owners
situation growing rate
– Existence of sectors in crisis – Presence of innovative and leading industries
– Profitability, quality, and adaptation to change in – Research in technology and design
industry
– Favourable experience of similar manufacturers in the
area
335
Appendix 2
CR = 0.0022 47-B 98-B 16-B 10-B 140-B Weights
Dominance of plots with respect to plot area (EV11)
47-B 1 1/3 3 1/2 1 0.135
98-B 3 1 9 2 3 0.430
16-B 1/3 1/9 1 1/6 1/3 0.045
10-B 2 1/2 6 1 2 0.255
140-B 1 1/3 3 1/2 1 0.135
CR = 0 47-B 98-B 16-B 10-B 140-B Weights
Dominance of plots with respect to corner position (EV12)
47-B 1 1 1 1/2 1 0.167
98-B 1 1 1 1/2 1 0.167
16-B 1 1 1 1/2 1 0.167
10-B 2 2 2 1 2 0.333
140-B 1 1 1 1/2 1 0.167
CR = 0 EV11 EV12 Weights

Contribution of the variables ‘‘Plot characteristics’’ to the price of plot 47-B
EV11 1 9 0.900
EV12 1/9 1 0.100
EV11 1 9 0.900
EV12 1/9 1 0.100
EV11 1 9 0.900
EV12 1/9 1 0.100
EV11 1 7 0.875
EV12 1/7 1 0.125
EV11 1 9 0.900
EV12 1/9 1 0.100
Appendix 3
CR = 0 47-B 98-B 16-B 10-B 140-B Weights
Dominance of plots with respect to proximity to industrial park exit (EV21)
47-B 1 2 2 2 4 0.364
98-B 1/2 1 1 1 2 0.182
16-B 1/2 1 1 1 2 0.182
10-B 1/2 1 1 1 2 0.182
140-B 1/4 1/2 1/2 1/2 1 0.091
CR = 0 47-B 98-B 16-B 10-B 140-B Weights
Dominance of plots with respect to proximity to common facilities (EV22)
47-B 1 2 1/2 1 2 0.200
98-B 1/2 1 1/4 1/2 1 0.100
16-B 2 4 1 2 4 0.400
10-B 1 2 1/2 1 2 0.200
140-B 1/2 1 1/4 1/2 1 0.100
Dominance of plots with respect to proximity to green areas (EV23)
47-B 1 1/4 1 1/2 1/2 0.100
98-B 4 1 4 2 2 0.400
16-B 1 1/4 1 1/2 1/2 0.100
10-B 2 1/2 2 1 1 0.200
140-B 2 1/2 2 1 1 0.200
Dominance of plots with respect to plot position facing motorway (EV24)
47-B 1 1/4 1 1 1 0.125
98-B 4 1 4 4 4 0.500
16-B 1 1/4 1 1 1 0.125
10-B 1 1/4 1 1 1 0.125
140-B 1 1/4 1 1 1 0.125
CR = 0 EV21 EV22 EV23 EV24 Weights
Contribution of variables ‘‘Plot location in the industrial park’’ to the price of plot 47-B
EV21 1 2 6 2 0.462
EV22 1/2 1 3 1 0.231
EV23 1/6 1/3 1 1/3 0.077
EV24 1/2 1 3 1 0.231
EV21 1 2 6 2 0.462
EV22 1/2 1 3 1 0.231
EV23 1/6 1/3 1 1/3 0.077
EV24 1/2 1 3 1 0.231
EV21 1 2 6 2 0.462
EV22 1/2 1 3 1 0.231
EV23 1/6 1/3 1 1/3 0.077
EV24 1/2 1 3 1 0.231
EV21 1 2 6 2 0.462
EV22 1/2 1 3 1 0.231
EV23 1/6 1/3 1 1/3 0.077
EV24 1/2 1 3 1 0.231
EV21 1 2 6 2 0.462
EV22 1/2 1 3 1 0.231
EV23 1/6 1/3 1 1/3 0.077
EV24 1/2 1 3 1 0.231
(continued on next page)
CR = 0 EV22 EV23 EV24 Weights
Influence of variables ‘‘Plot location in the industrial park’’ on proximity to industrial park exit (EV21)
EV22 1 7 7 0.778
EV23 1/7 1 1 0.111
EV24 1/7 1 1 0.111
Influence of variables ‘‘Plot location in the industrial park’’ on proximity to common facilities (EV22)
EV21 1 7 7 0.778
EV23 1/7 1 1 0.111
EV24 1/7 1 1 0.111
Influence of variables ‘‘Plot location in the industrial park’’ on proximity to green areas (EV23)
EV21 1 1 1/9 0.091
EV22 1 1 1/9 0.091
EV24 9 9 1 0.818
Influence of variables ‘‘Plot location in the industrial park’’ on plot position facing motorway (EV24)
EV21 1 1 1/7 0.111
EV22 1 1 1/7 0.111
EV23 7 7 1 0.778
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Valuation of urban industrial land using ANP

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European Journal of Operational Research 185 (2008) 322–339

Valuation of urban industrial land: An analytic network

Received 27 March 2006; accepted 26 September 2006

Keywords: Multiple criteria analysis; Pricing; ANP

2. Background of AHP and ANP

(i) Conducting pairwise comparisons on the elements.

3. ANP-based methodology for the valuation of urban industrial land

3.1. Problem formulation

3.2. Selection of the reference assets

3.3. Selection of the explanatory variables

3.4. Representation of the valuation problem as a network

3.5. Prioritisation of the assets using ANP

3.6. Determination of the value/weighting ratio

3.7. Calculation of the problem asset value

4.1. Problem formulation

4.2. Selection of the reference plots and the explanatory variables

Fig. 1. Industrial park Cotes B in Algemesı́ (Valencia, Spain).

4.3. Resolution of the valuation problem

Plot characteristics (EV1) Assets

Plot location in the industrial park (EV2)

4.4. Determination of the end value of the problem plot

P. Aragonés-Beltrán et al. / European Journal of Operational Research 185 (2008) 322–339

P. Aragonés-Beltrán et al. / European Journal of Operational Research 185 (2008) 322–339

P. Aragonés-Beltrán et al. / European Journal of Operational Research 185 (2008) 322–339

P. Aragonés-Beltrán et al. / European Journal of Operational Research 185 (2008) 322–339

CR = 0 EV11 EV12 Weights

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