Introduction to Commercial Real Estate Valuation
Are you a business owner? If you’re looking to sell or change your ownership structure, a commercial property valuation may be in the cards.
These are only a few of the many reasons you’ll need a commercial property valuation from independent property valuers in Melbourne. Chances are you’ve been through the process of real estate appraisal before, but this is quite different.
The difference is method, objectivity and research. After all, real estate agents are set up to earn commission on your sale or purchase. They have a personal, vested interest in the value of your property.
Certified valuers do not. They are prepared to accurately calculate the value of any property.
Compared to a home valuation, commercial valuations require highly specialised knowledge. Valuers must review everything from financial records and physical assets, to your business' location and surrounding developments. It's important to select a valuation service with staff who are as financially savvy as they are with the property market.
Valuers are licensed and highly trained to ensure impartiality. They provide a host of sought-after valuation and consultancy services to meet the needs of your specific property type.
This includes:
- commercial
- residential
- retrospective property
- land
- business
- and real estate valuation
There are numerous methods and reasons to seek out and perform a commercial valuation. These services are always tailored to meet our clients’ needs. Our licensed valuers come equipped with specialised knowledge of your area.
If a valuation is in the cards for your commercial property, you’ll want to know as much as possible. This includes defining commercial real estate Valuation, the methods that go into it and just what exactly the end result of all this is.
What is Commercial Real Estate Valuation?
There’s a thousand reasons to know the real value of your property. You want to guarantee a return on your investment. Maybe you’re trying to set a fair rental price.
Your best friend in this is a legally certified property valuation. They come in the form of extensive reports stipulating your property’s market value. These reports detail the methodology used and are applicable to various legal or administrative requirements. This could be for tax purposes or various official applications.
These could include:
- capital gains tax
- family law
- stamp duty
- or market valuations
Our CPVs are associate members of the Australian Property Institute (API). This guarantees you a professional sporting all the relevant training and work requirements for experience. It doesn’t end there either. API-certified CPVs are subject to continuous professional development.
It’s the ultimate badge of quality and consistency in the property world. The only way to ensure your property’s value is a real reflection of the market.
How to Perform a Valuation of Commercial Property
To ensure you earn the rental income you deserve or don’t overpay on your purchase, you need to know a property's true market value. The only way to discover this is through a comprehensive valuation of commercial property.
This necessitates a more scientific approach than appraisals.
Your valuer may use any combination of several methods, such as:
- the Direct Comparison approach
- the Summation approach
- and the Income approach
What valuation approach is used for commercial real estate will depend on your valuer. They are equipped to make the right calls based on your specific needs.
Direct Comparison is the most common and arguably most extensive approach. This relies on the most comprehensive and accurate property databases available. It involves deriving your property’s value by comparing it to similar properties in the area.
Your valuer will draw comparisons based on a list of over 200 internal and external points.
Summation is generally a secondary method. It comes down to separately valuing each component of the asset in question to arrive at the whole value. This includes listing and valuing any improvements or additions made. Finally, this is then taken in accordance with the underlying land value.
The Income approach exists to determine the potential return on investment. Essentially, this equates to declaring value based on income.
Types of Commercial Property Valuation
You may be wondering exactly what kind of commercial property valuation you’ll need. Your reasons for seeking out a report will determine its contents.
The most common types of commercial property valuation include:
- Pre-purchase or pre-sale: vital when negotiating the sale of any property.
- Property settlement: third-party valuations are crucial to ensure all parties involved in settlement matters can agree on the declared value of any property.
- Rent review: this is generally conducted midway through or at the end of a lease term. It's a well-proven method for setting rental prices based on market value.
- Business: this takes into account the various parts of an enterprise to calculate the greater value of the business as a whole.
- Compulsory acquisition valuation: these are undertaken in the event of a forceful government purchase of your property to ensure the requisite compensation is offered.
In Conclusion
Whether you’re buying or selling, property is a serious investment. It requires due diligence.
There’s only one way to ensure your property’s value is set according to the realities of the market. A commercial property valuation report by one of our CPVs affords you the peace of mind that only 20 years of experience can.
The training provided by the Australian Property Institute is a mark of quality. It equips certified valuers to work to the highest quality standards while maintaining transparency across the process. This stands regardless of the methods used or type of valuation conducted.
If you’re a business owner, it’s safe to say you’ll be needing a valuation soon. For this, or to receive a free quote, get in touch with one of our certified valuers today.
