3 Keys To Understanding How Commercial Property Is Valued

Have you ever wondered why the cost of a piece of land or a commercial building is priced the way it is? Understanding how commercial property is valued can be difficult, so we’d like to clear up a few ways property is priced, and why they make sense.

If you’re looking for fairly-priced commercial properties for sale or lease, get in touch with our team at Miller Properties today!

1. Rebuild Cost

When determining the value of commercial property, the rebuild cost will likely be part of the discussion. If the entire structure were destroyed by accident, natural disaster or other means, what would be the cost to rebuild it?

The rebuild cost is based on building the structure entirely from new materials and replacing what was. In order to arrive at a fair value, you have to determine the current and future cost of the land, materials, and labor needed.

You may look at a building and believe it’s only worth $250,000, but it might cost $375,000 to rebuild it as-is, which pushes the sale cost higher.

2. Recent Area Sales

Another method of figuring out how commercial property is valued is by using the market approach. Here you take recent area sales data for surrounding properties. By looking at the amenities and features of each property and comparing them against yours, along with their sale price, you can begin to build an accurate picture of the value of your commercial building or property.

Depending on the market, it may be hard to find similar properties which have recently sold, and so this method can be hard to utilize.

3. Associated Costs

One more major way of figuring out how commercial property is valued is by looking at the associated costs. With the commercial building or property you’re looking at leasing, are there utility, maintenance, parking or other costs you’ll be responsible for?

These associated costs can cause a property’s value to rise or fall, so it’s important to determine up front if they’re rolled into a lease or not so you can make an accurate comparison between your options.