Property that’s used for commercial purposes like offices, malls, super markets, restaurants, etc are known as commercial property. These properties are put to use in order to generate profits and grow one’s business. You must know your commercial property value in order to be a righteous judge of what’s right and what’s not, and to make a mindful decision. Whether you’re in the market to sell or buy, being informed about the current rate can help you along the way.
There are commercial property valuation methods known to help people in the process of their real estate transactions. Calculating commercial property value can be very tricky and if you are thinking of doing that yourself or through word of mouth, that might not be the best option. Residential value is much easier to calculate than commercial property and for this reason your best bet is to get commercial property valuers on board to assist you.
Commercial property valuers have adequate skills and experience to evaluate property value. They can examine the property closely and give you an informed report on what are the risk factors and advantages that this estate holds for you. A property valuer will take factors into consideration such as economy value, market conditions, etc.
There are two methods that can be used in assessing market value:
These two methods can be used thoroughly to perform an assessment where it is required. With the help of these methods, or either of them, the valuation process for any commercial property can be carried out accurately with timely results. These two methods are namely:
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The Income Approach:
- A commercial rent for each square metre of the floor is calculated on the basis of how much would the landlord would gain in returns.
- For commercial property valuations, the above calculated rental is then compared against rental evidence available in the market to know if the rental price is fair and square.
- This means that the landlord is responsible for any recoverable outgoings such as land tax, rates, repair and maintenance, etc.
- Under a net rental agreement, the tenant can be responsible for recoverable outgoings.
- Land tax however is a non-recoverable outgoing that a landlord cannot pass on to the tenant. As commercial property valuers, it is our priority to lay down rules about who pays what and to calculate the Net Annual Income that the landlord would receive.
- The calculated NAI then becomes the basis of the evaluation assessment.
- The amount is then capitalised at a market acceptable yield.
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Comparable Transactions Method:
This method uses a variety of different comparable pieces of evidence known as units of comparison. Many common comparison units are used for real property interests like price per square metre, rent per square metre and capitalisation rates. The key steps used in this method are:
- Know what units of comparison are other participants using in the market.
- Calculate the key valuation metrics for the relevant comparable transactions.
- Build a comparative analysis of qualitative and quantitative similarities and differences between the subject asset and the comparable asset.
- Make necessary adjustments to the valuation metrics if required. Reflect the differences between both, the comparable asset and the subject asset.
- Apply the adjusted valuation to the subject asset.
- Adjust the indications of value if multiple valuation metrics were used.
Commercial property valuations can be very tricky and it’s essential to bring in a professional who knows how these calculations will work out in your favour. A property valuer can save you a lot of stress and give you a sense of assurity. Do a thorough research before choosing a professional property valuer and make your life a little easier.
