Typically, fast food properties are appraised based upon the price per square foot of building including land. In many cases, however, a price per square foot of land including building would produce a more credible value. Fast food restaurants are often relatively small buildings on large sites. The contributory value of the building can be quite modest relative to a high worth land site.

In 2016 we completed an analysis of 74 fast food properties in the Chicago Metropolitan Area (CMA) to see which appraisal method would produce comparables in a closer range that would be considered more predictive of value. Mathematically it's called the coefficient of variation (CV) which is a measure of variation near the mean. In our analysis, the coefficient of variation was 0.614 per square foot of building area versus a CV of 0.742 for a price per square foot of land area. This would imply that a price per square foot of building indicator would generally have a somewhat tighter range than the price per square foot of land in most cases. The difference is not large, however, and in neither case was the coefficient of variation (CV) tight implying that neither approach generated highly predictive indicators for fast food restaurants.

The more important take away is that in many situations, a price per square foot of land or the use of both a price per square foot of building and price per square foot of land could result in a more accurate value. Defensively, it could also offer a further level of protection. I could easily see the Cook County Assessor starting to apply this same price per square foot of land analysis to fast food restaurant appraisals (as the currently already do for gas stations/mini-marts). Should this occur, many appraisals that only considered the price per square foot of building could actually provide a basis for a higher assessment instead of a reduction. Likewise, in a bank appraisal, values pointing to highly different conclusions need to be reconciled to provide a more credible value.