ITZA explained

  1. For consistency in measuring, surveyors comply with the RICS Code of Measuring Practice and/or Property Measurement Professional Statement. But ‘zoning’ is not a measuring methodology.’Zoning' is a valuation methodology for comparing rents of shops of different sizes and layouts.
    1. The principle of zoning was invented by a surveyor for rating valuation. Nowadays, zoning is recognised as a standard in the valuation of shop property generally. It doesn't matter which of the other valuation methodologies one uses, provided the approach is consistent. The market-led method, also known as the comparative method, more commonly ‘comparable evidence’, is the most direct valuation approach: arguably, it is easier to estimate a Zone A value than undertake profits methodology.
  2. After measuring the premises, the layout or configuration of the shop is designated in zones. The depth of each zone is normally 20’0” (6.096 m), but 30’0” (9.14 m) depth is used in some places. Zoning for Rateable Value follows the usual convention, but in some places 15’0” (4.57m) 25’0” (7.62m) and 20’0” (6.096m) is used.
    1. From now on, to avoid visual 'clutter' I use imperial dimensions and areas only. Many shop surveyors/valuers still use imperial (feet, inches, sqft) rather than metric (m, mm, sqm). For conversion of sqft to sqm and £psf to £psm, and vice versa, I provide a calculator at ML Converter.
  3. The first zone is Zone A which is the most valuable. The second zone is Zone B, the next is Zone C, and so on. Generally, zoning ends at Zone D or E, with any other zones known as 'Remainder'. The less valuable zones are related to Zone A, generally, by halving-back from Zone A. For example, Zone B is A/2, Zone C A/4, Zone D A/8. However, depending upon other factors, the relativity can be A/3, A/5, A/6 or whatever. Valuation is a matter of opinion: not an exact science, valuation is also an art.
    1. Generally, a lower value would be attributed to space not on the ground floor or is not trading space, such as a kitchen/staff area. Such space might be valued overall using a spot value or relative to Zone A, for example, £2.50 psf overall, or A/10, A/15, A/12, A/20. External space in outbuildings and garages is generally valued overall.
    2. Changes or variations in floor levels can mean part of a zone is valued differently to other part(s). Masking, where the line of sight or view from the frontage is interrupted structurally, such as an L-shape. Return frontages can make a difference.
  4. ITZA is surveyor-abbreviation meaning 'area in terms of Zone A'. Totalling the areas of each zone and expressing the total in terms of Zone A is the quick way to analyse (devalue) a rent. Alternatively, there are two other approaches to value each zone, both of which, presupposing consistency, produce the same result.
    1. Zoning has its limitations and should not be regarded as a panacea for all situations. It is important too to know how an ITZA has been arrived at before assuming the Zone A value from which the ITZA is derived is applicable to the premises in question. For example, if for the ITZA its Zone C were at A/5 then the resultant Zone A value would only be applicable to the premises in question if Zone C of the premises in question were also A/5. Although application of a Zone A value to the premises in question would, assuming valuation areas agreed, indicate the likely rent, valuation is not an exact science, it is also an art. Devaluation (analysis) can be a matter of opinion.
  5. The following example calculates (i) ITZA and Zone A value for Shop X and (ii) compared to Shop X the rent for Shop Y.

    Shop X width is 18’0” and depth 55’0” (total area 990 sqft). Shop X rent is £25,000 pa which equates to £25.2525 psf overall.

    Shop Y width is 16’6” and depth 67’0” (total area 1105.5 sqft). Based on Shop X rent overall, Shop Y rent is £27,916.67 pa. However, the overall basis ignores the fact that Shop Y is narrower and deeper than Shop X.
  • Shop X
  • ITZA
  • Zone A - 18’0” x 20’’0” = 360 sqft
  • 360/1 = 360
  • Zone B - 18’0” x 20’’0” = 360 sqft
  • 360/2 = 180
  • Zone C - 18’0” x 15’’0” = 270 sqft
  • 270/4 = 67.5
  • Total = 990 sqft.
  • ITZA = 607.5 sqft
  • Rent £25,000 divided by ITZA 607.5
  • = Zone A £41.152
  • Shop X - Alternative approach (1)
  • Zone A £41.152
  • Zone A 360/1 = 360
  • 360 * £41.152 = £14,814.81
  • Zone B 360/2 = 180
  • 180 * £41.152 = £7,407.41
  • Zone C 270/4 = 67.5
  • 67.5 * £41.152 = £2,777.78
  • Total = £25,000
  • Shop X - Alternative approach (2)
  • Zone A £41.152
  • Zone A 360
  • £41.152/1 = £41.152 * 360 = £14,814.81
  • Zone B 360
  • £41.152/2 = £20.576 * 360 = £7,407.41
  • Zone C 270
  • £41.152/4 = £10.288 * 270 = £2777.78
  • Total = £25,000
  • Shop Y
  • ITZA - Using Zone A £41.152
  • Zone A 16’6” x 20’0” = 330
  • 330/1 = 330
  • Zone B 16’6” x 20’0” = 330
  • 330/2 = 165
  • Zone C 16’6” x 20’0” = 330
  • 330/4 = 82.50
  • Zone D 16’6” x 7’0” = 115.50
  • 115.5/8 = 14.4375
  • Total area = 1105.50 sqft
  • Total ITZA = 591.9375
  • ITZA 591.9375 * £41.15 = £24,359.57
  • Shop Y - Alternative approach (1)
  • Zone A £41.152
  • Zone A 330/1 = 330
  • 330 * £41.152 = £13,580.25
  • Zone B 330/2 = 165
  • 165 * £41.152 = £6,790.12
  • Zone C 330/4 = 82.5
  • 82.5 * £41.152 = £3,395.06
  • Zone D 115.5/8 = 14.4375
  • 14.4375 * £41.152 = £594.14
  • Total = £24,359.57
  • Shop Y - Alternative approach (2)
  • Zone A £41.152
  • Zone A 330
  • 330 * £41.152/1 = £13,580.25
  • Zone B 330
  • £41.152/2 = £20.576 * 330 = £6,790.12
  • Zone C 330
  • £41.152/4 = £10.2888 * 330 = £3,395.06
  • Zone D 115.50
  • £41.152/8 = £5.144 * 115.5 = £594.14
  • Total = £24,359.57
Summary. Compared with smaller Shop X, the overall rent for larger Shop Y is £27,916.67 pa. But using zoning, reflecting the differences in width and depth, Shop Y rent is £24,359.57 pa.
Rounding. The numbers in the above example are to three decimal places, but rounding makes a number simpler. Whether a number is rounded up or down depends upon the nearest. When the number of decimals places is two, typical with Zone A value, in the example Zone A would be £41.15. If the number of decimal places were limited to one then whether Zone A should be £41.2 or £41.1 depends upon whether you want the result to be more or less. Rounding to the nearest up or down as you go can distort the figures. I round up or down at the end. It’s your money that’s at stake.
I have designed an ITZA Calculator. When you enter an area of a zone and the relativity, it calculates the area in terms of Zone A (ITZA), provides a total ITZA. Entering a Zone A value calculates the rent yearly and monthly. It is free to use at ITZA Calculator.