The property industry relies on external valuations to provide the equivalent of the gold standard against which the value of its currency - in this case, real estate assets - is to be measured. But is this standard as unadulterated as both investors and landlords assume?

Last week, Great Portland Estates, the quoted West End office and retail property company, reported a 12.8 per cent drop in the value of its shopping centre portfolio, more than twice the rate reported for the retail assets of any of its quoted competitors.

Could it be that GPE's assets were more vulnerable to adverse market sentiment than those of its competitors? Or is there something fundamental about the valuation process at work here?

Peter Shaw, managing director at GPE, says he has every reason to believe his company is not a one-off. "Our independent valuers are saying yields on shopping centres have moved out by 1.0 per cent to 8.0 per cent," he says, noting that equates to roughly a 14 per cent decline in capital values. Moreover, GPE had good reason to believe that figure is correct. "We tested that figure in the market," he says.

Following its March 31st year end, GPE put centres in Bridgend, Yeovil and Torquay on the market. "We had five offers, two of them at almost the same figure and we chose one of them." The initial yield on the sale was more than 8 per cent. For the company's remaining centres, in the better markets of Burnley, High Wycombe, Harlow and Cardiff, Mr Shaw estimates the yields are more than 7 per cent - but a percentage point higher than they were a year ago.

What may be happening, Mr Shaw suggests, is that transaction volumes are too low to enable valuers to accurately gauge yields on comparable product.

Investors looking to unload their shopping centres may take them off the market after finding the prices they seek are not achieveable.

Mark Callender, head of UK research at Investment Property Databank, the performance measurement service, concedes that sales of retail product generally are very thin.

"For the retail market as a whole, trading has dropped off a cliff," he says.

"Investors just won't sell below the valuation level. In theory, valuers should just mark them down." Indeed, GPE's valuers, CB Hillier Parker, point to rising yields among secondary shopping centres in their quarterly bulletin dated March 2001.

While prime yields on the best centres remain rock-solid at 5.75 per cent, level with the year before, secondary yields are weakening. CBHP says: "More secondary regional centres have seen a clear weakening in demand and increase in yields over the past quarter.

"Whereas 7.75 per cent may have been achievable during the first half of 2000, today it is likely to be between 8.25 per cent and 8.5 per cent." Mark Creamer, CBHP managing director, says the absence of transactions involving centres of similar value does not necessarily make valuation impossible. For one thing, valuers conduct cash flow analyses of centres and rely on comparable evidence from other stores in the same town. But Edmund Camerer-Cuss, an adviser to property consultants Donaldson's, says the reality is that valuation is a process involving considerable subjectivity.

"To say surveyors are optimists is like saying Charlton Heston was handy with a horse and cart," Mr Camerer-Cuss says, adding that it is possible that current-day valuers may never have seen the film Ben Hur.

Mr Camerer-Cuss cites research from professors at the University of Reading that examined the bias towards optimism.

On rent reviews, it seems that, although a bare majority of reviews on the largest units with a shopping centre are settled within £100 sterling of valuers' estimates, only 15-30 per cent of smaller units were in line.

The research also showed that, while investors have a 20 per cent chance of doing better on rent review than had been estimated, the odds that they will do worse are 55-60 per cent, or three times as likely.

When valuers underestimate rental value, they do so by about 20 per cent, while when they are too pessimistic, it is by a more modest 12 per cent.

If the University of Reading data are still correct, how should investors interpret the valuation assigned to GPE's shopping centres versus that assigned to the portfolios of other similar companies?

Even if GPE's valuation errs on the side of pessimism, it is difficult to believe the net asset value figures assigned to its competitors' portfolios are the gold standard their shareholders would like.