Before any commercial real estate transaction takes place – whether it’s buying, selling or leasing – the value of the building in question has to first be appraised.

Determining the value of a commercial property is not a simple task, and it is often a lot more subjective than the valuation of residential properties. This is largely due to the fact that commercial property values are affected by such variable and unpredictable factors as the current market price for rentals, and overall maintenance costs.

In addition, the scope of a commercial property valuation is generally much greater than with a residential property, as it is usually much bigger, and built on more expensive land.

So, with all these factors in play, how do we determine the value of a commercial property? There are those who say that no matter what value is attached to a property, it’s only worth as much as someone is willing to pay. Fortunately, there are tried and tested approaches valuators can use to make sure that the final figure they arrive at is as accurate an assessment as possible of the true value of the property.

Income Approach

This determines the net present value of the revenue stream that the business in question generates, and is based primarily on the amount of income an investor can expect to derive from the property.

Cost Approach

This method works out how much it would cost to rebuild the structure from scratch. It takes factors such as the current cost of associated land, and the construction materials that would be required, into account.

Market Approach

This is also known as the “sales comparison approach.” It relies heavily on available information on recent sales for other companies of the same size, in the same area and in the same, or similar, industry.

If you’re looking to expand, acquire a new business, or sell a business you’ve invested a lot of time and energy into building, make sure you use a professional, experienced valuation company like The Property Partnership. You can be confident that we will fairly and accurately assess the market value of the property in question. Contact us today.