Commercial Property Valuation: Different Factors To Consider

Determining the value of commercial property is a very complex task

, and evaluators that have a deep global perspective are often in the best position to make the most accurate appraisals. The reason for that particular fact is simple on the surface, but complex when examined closely.

Most of the reasons boil down to the ability of well-informed appraisers to see different potential uses for properties, or to understand that the current and/or projected applications for a commercial property are not very durable given existing and projected trends.

At their most basic level, commercial properties are worth money because they are areas where businesses have easy access to consumers and possibly even foot traffic. The problem that many uninformed or under-informed commercial property appraisers run into, often without even knowing it, is that economic trends and sociopolitical changes around the world could easily affect the highest and best use for any commercial property. For example, if a commercial property is ideal for a restaurant, then global factors relating to food, unemployment, projected unemployment, and even political relationships between countries could impact the potential uses for a property.

Not knowing these factors and simply assuming that the world never changes is a poor idea at best, and will almost certainly result in an assessment of value that is far off the mark. These same factors can be exacerbated when work needs to be done on the property, either renovation or just a makeover to re-purpose the facility/facilities in question.

Of course, there are different reasons that different types of people buy into commercial property. Some may be looking to turn the property around quickly, and thus will be more interested in a fair market value of the property and/or its existing business. That business may factor in foot traffic that declines each day the company has its doors closed. This is often referred to as value-in-use, which may or may not be the best and highest use of a property. Others might be more interested in the long term value of a property, and thus a commercial property valuation will need to take a look at the long term potential of a property.

by: Jonathan Westmoreland.

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