For regulated and audited investment vehicles, this lag may become an effective ceiling, limiting what investment committees are willing to pay. The issue is amplified when a concentrated valuation market means that several competing investors rely on the same valuation platforms, raising questions about practical independence, internal consistency and market influence.
Key takeaways
- Valuations can lag rapidly moving markets. In fast-moving cycles, formal valuation methodologies may struggle to keep up with market pricing.
- Concentration of valuation providers creates risk. Relying on a small group of firms may increase the risk of market distortion.
- Second opinions deserve more attention. Borrowers, lenders and investors may benefit from broader perspectives and independent challenge.
Valuation opinions often lag market pricing
Discover how valuation, intended as an independent opinion, risks in certain circumstances becoming a market-making force and why greater use of second opinions and closer attention to valuation expertise concentration may help mitigate this risk.
“If we don’t give them the ratings, they’ll go to Moody’s, right down the block!”
That line, delivered by “Georgia”, the fictional Standard & Poor’s representative in Adam McKay’s The Big Short (2015), to Mark Baum, the fictionalised hedge fund manager confronting her about the lack of independence in credit ratings, captures quite well what some of us may have assumed valuation expertise in real estate, and especially acquisition underwriting, ultimately boiled down to.
Behind all the valuation theory, the models and the projections, the assumption was simple: if a valuer failed to align with a client’s pricing expectations, that client would simply turn to another firm down the block.
When valuation lags the market
Consequently, if a buyer needed a valuation at a certain price to justify a transaction, the valuation expert would very often end up aligned or very close to it. At best, there might be a slight disagreement and a modest adjustment to the final value, but rarely anything material. In the end, the valuation expert would be tempted to bend for the sake of securing the next mandate.
In that sense, valuation independence could be perceived as relative.
What we are seeing today suggests that this belief is quite wrong.
As of early May 2026, despite heightened global economic uncertainty and a broader reshuffling of the geopolitical order, the Swiss real estate market continues to move upwards, almost as if detached from the surrounding noise. This is particularly true for core and selected core+ assets, where price increases have been both visible and relatively rapid.
In this upward-moving Swiss real estate context, valuers, who understandably tend to rely on historical comparables to support present-day conclusions, are struggling to keep pace with the new pricing levels currently indicated by investors’ willingness to buy, notably for core commercial assets.
In some cases, this lag between the valuation expert’s opinion and the market is effectively preventing some transactions from taking place.
Of all the challenges sell-side advisers face, one rarely expects third-party external valuers to become such a genuine source of friction. Advisers should be used to pushing against different stakeholders to achieve the best outcome for their clients. At times, they even need to challenge their own clients’ assumptions. But over the last decade, the valuer was rarely high on the list of likely obstacles.
As stated, valuation is, by nature, at least partly backward-looking. It relies on evidence, comparables and defensible assumptions. This is therefore not necessarily a question of the expert’s individual judgement alone. But when market pricing moves quickly, especially in less liquid segments such as non-residential real estate, the valuation process can struggle to absorb the shift in real time.
Today, the lag works in that direction: investors’ willingness to buy is moving faster than the valuation evidence that can be formally relied upon, but it is worth noting that not so long ago, valuation inertia distorted the market in the other direction. Between roughly mid-2022 and mid-2025, particularly in certain commercial and higher-risk segments, external valuation prices were often above executable transaction levels. During that period, the lag was not restricting buying power but rather reducing the incentive to sell. For institutional owners operating under audited balance sheets and performance constraints, disposing of an asset materially below book value meant crystallising a write-down that was difficult to justify or absorb. In such cases, the consequence was that retaining vacant or risk-exposed assets was preferable to realising an immediate loss. The broader point is that, at market turning points, valuation inertia can hinder price discovery on both the buy side and the sell side.
The institutional investor dilemma
Fair enough. The official role of the third-party valuer, after all, is not to rubber-stamp market excitement. It is to provide an independent value opinion based on supportable evidence. The client then makes the investment decision and may, in theory, decide to go below or beyond the expert’s price opinion.
But this is where theory and practice diverge, particularly for institutional investors subject to investment committees, boards, auditors and regulatory scrutiny.
Once an investment vehicle is regulated and audited, it becomes much harder in practice for an investment committee to justify paying materially above the external valuation. Technically, the committee may be able to do so. In reality, it then has to defend that decision internally, to auditors, and within a framework built around investor protection and proper market functioning.
So, while the valuer does not formally make the investment decision, the valuation often becomes the invisible ceiling above which the committee no longer feels comfortable going.
In an interesting twist of fate, this dynamic may also have an unintended consequence. It can benefit non-institutional, or more “agile”, investors: players with fewer constraints and, historically, less pressure to deploy capital at scale. In a low-interest-rate environment that is otherwise difficult for many of these investors, often private capital, flexibility may become a competitive advantage. Where institutional buyers may be constrained by an external valuation ceiling, less regulated investors may retain the ability to act on conviction, timing and relative market opportunity.
Thus, the external valuation begins to carry consequences beyond its formal purpose by potentially preventing, in practice, the investor willing to pay the highest price from acquiring the asset.
From independent opinion to market constraint
As valuation expertise becomes concentrated, a single valuation platform may indirectly influence the pricing capacity of multiple competing investors.
The concentration risk
In itself, a valuation expert’s caution, prudence and willingness to stand their ground may be healthy. It reflects discipline and a useful resistance to short-term volatility or excessive pricing. A healthy market should have safeguards against extremes and outlier value points.
However, a separate issue emerges when individual valuation caution is combined with a highly concentrated valuation market. The concern is no longer simply that a single valuation may be conservative. The concern is that a small number of valuation platforms may end up shaping the pricing capacity of several competing investors at once.
In such a context, the value opinion may become less independent in practice, not necessarily because of direct client pressure, but because caution can evolve into an internal value-ceiling mechanism within valuation platforms, operating across mandates despite formal Chinese walls between teams and clients.
“A healthy market should not be shaped by quasi-centralised reference points.”
In other words, when two or more distinct clients appoint the same valuation firm, even if different valuers and teams are involved behind formal Chinese walls, a significant gap between one valuation conclusion and another may create discomfort within the valuation firm’s own internal review process. Red flags may then be raised, not necessarily because anyone has acted improperly, but because the platform has an understandable interest in preserving consistency and credibility across its valuation opinions.
The result is that valuation teams which are, in principle, independent from one another may nevertheless become aware that their conclusions differ materially from those of their colleagues. In such circumstances, there may be a tendency for the higher value to be pulled back into line to preserve internal consistency.
If that dynamic happens, it raises an important question: how independent is the opinion, really?
The answer may lie somewhere between formal independence and practical constraint. Chinese walls may exist, but the more a platform is exposed to competing mandates, the harder it becomes to ignore the weight of internal consistency.
When that convergence happens, the question of who is making the market becomes even more relevant.
Who is really making the market?
Is it the investor’s willingness to buy real estate, assessed against other asset classes and balanced within an overall portfolio allocation strategy? Is it the normal interaction between supply and demand?
Or is it a form of valuation consensus, produced within a limited number of dominant platforms, looking backwards at past comparables and ultimately determining what price can be defended by multiple investors?
This invisible data wall becomes quickly perceptible when, out of a handful of expected binding offers, three quarters of them, with the same valuation provider, are tightly clustered and appear to be blocked behind the same valuation ceiling.
In a healthy system, prices should be set by investors, through supply and demand, relative value considerations and portfolio allocation decisions. The valuer’s role should be to interpret that reality, not to constrain it.
If, however, the same valuation platform ends up influencing multiple participants in the same sale process, valuation ceases to be a mere observation tool. It starts becoming a market-making force.
What this means for investors
- A quasi-monopoly in valuation is unhealthy for the market. Too much concentration in the hands of a few firms creates rigidity, herd behaviour and transaction risk.
- Relying on a single exclusive expert can become a serious execution risk for investors. This is particularly true for institutional and FINMA-regulated structures which, in practice, may work with only one valuation provider.
- A second opinion should be considered more often. Ideally, investors should be able to complement the “official” valuation view with another perspective, whether from a smaller boutique firm, an independent practitioner, or another credible adviser with a different angle on the market.
- Independence becomes more theoretical when the same valuation house advises multiple competing market participants. The more a valuation platform is exposed to multiple competing mandates, the more legitimate the question of practical independence becomes. Chinese walls may exist formally, but market participants are entitled to ask whether they always work as intended in practice.
Having an incentive does not automatically invalidate the point
To conclude, and to address those who may question an adviser’s motives in criticising a system that benefits large industry players, or who may simply doubt this piece good faith, we return once again to The Big Short.
Georgia, the S&P representative, to Mark Baum:“I wonder what your incentive may be. Is it maybe in your best interest to have the ratings changed? Is it perhaps? …”
Mark:“Doesn’t make me wrong.”
Georgia:“No. Just makes you a hypocrite.”
And that, perhaps, is the real discomfort of this discussion:
Having an incentive does not automatically invalidate the point being made.
Alexandre Azar
Senior Consultant Capital Markets
Email: aza@spgpartner.ch
Tel: +41 22 707 46 81
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