Brief Overview: Commercial Office Valuation
A commercial office valuation is essential to commercial real estate agents, potential commercial property buyers or commercial property vendors. The agent requires the assessed value of the commercial office to advise their buyer or vendor client; the buyer requires the valuation to know that he is not overpaying; and the vendor requires the valuation to know that he is not selling below what the commercial office is worth.
Although not mandated in the International Valuation Standards (IVS), when two of the three primary methods of valuation used by commercial property valuers are combined, a sound estimate of the value of a commercial property can be evaluated. These two methods are:
When there is little sales data, a commercial office valuation can also use a third method of valuation, that is, the Summation Approach or also known as the Cost Method as a check method to determine the value of the commercial property.
Commercial Office Valuation - Capitalisation Approach
This method bases the valuation of a property on the projected future rental income plus any recoverable outgoings, and then deducts all unrecoverable outgoings and expenses, including suitable allowances for vacancies, to arrive at the net income from the property. This net maintainable income is a forecast of earnings that are assumed to last in perpetuity and is discounted using an appropriate capitalisation rate (or cap rate) derived from comparable sales evidence.
When conducting a commercial office valuation using the income capitalisation method, these two crucial considerations must not be overlooked:
The Income Capitalisation Approach is frequently used as the primary method in the valuation of a commercial office.
Sales Comparison Approach
Sometimes referred to as a Market Comparison Approach, using this method of valuation, the value of a commercial property is determined by examining sales data from comparable properties (a.k.a. comps) and comparing those comps with the property being valued.
When conducting a commercial office valuation using the sales comparison approach, two key considerations are:
The Sales Comparison Approach is frequently used as a secondary method by commercial property valuers when preparing a valuation of a commercial office.
Cost Method or Summation Approach
This method of valuation involves the summation of the depreciated replacement cost of improvements (that is, comprising the main commercial building and other ancillary structures and built areas) to the underlying vacant land value to determine the property's value.
The valuation method is affected by these three main issues:
Why appoint AskTheValuer for your Commercial Office Valuation?
You will be getting more than a 'standard valuation'. A Hidden Value Property Check-Up will be included as a bonus.