Rail Corridor Appraisal Methods

Question: how does one determine the value of a rail corridor? Talk to ten different experts and one will get ten different answers. The reasons these answers will differ and because no clear consensus stands out, each rail corridor valuation will have it’s own set of complex issues to address. Therefore most experts will not offer one single approach for any specific corridor. Here are the three most widely used methods of valuating rail corridors:

Rail Corridor Valuation Approaches  

1. Comparable Market Approach. The appraiser arrives at a market value for the rail corridor by analyzing the terms negotiated in past and current rail corridor transactions. The challenge obviously is finding past transactions that resemble the subject rail corridor, such as ones with similar population density, land-use demands, adjacent land uses and zoning, acquisition date and intended use.
2. Income approach: The appraiser determines value based on a property’s potential to generate income. A railroad may generate revenue from easements or licenses with billboard or utility companies that use portions of the corridor. Yet this approach is rarely applied to rail line acquisitions for trail purposes since such specified revenue information is usually difficult to obtain.
3. Across-the-fence approach: The appraiser determines market value for the rail corridor based on factors such as adjoining property values. Many appraisers conclude that the across-the-fence method best accounts for local market conditions by using readily available information to extrapolate value. Others argue that this simple approach is inappropriate for railroad corridors because the adjacent property values are based on land uses that in many cases are impossible to replicate exactly on a narrow, linear corridor. 

Finally, upon abandonment, Federal regulations require Railroads to return railroad corridors to their original condition, which includes the removal of ties, tracks, and any other physical property. In many cases, the salvageable materials will be removed prior to the final property transaction of a railroad corridor. However, you may find that the railroad may be willing to sell more than just the corridor. Thus, the Final Value of these materials and any excess property will need to be taken into account when appraising the corridor.

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