When it comes to valuing property, there are a number of commonly known factors that apply to both residential property and commercial property, namely location, size and condition. With these factors in common, it might be considered that valuing commercial property is not too dissimilar to residential property.

However, when it comes to commercial property, there is one significant point of difference – the potential income the property can generate. 

Consider a large, run-down warehouse on a business park. Even in a poor condition, this property could have significant value due to its potential to be upgraded and then let for a significant figure.

Opposingly, a retail unit that has been empty for some time in an area with a weak local economy and low footfall could receive a low valuation, even despite its material value still being relatively high.

When seeking a formal valuation from a RICS Registered Valuer on a commercial property, there are a number of approaches that can be taken. First and foremost, the valuation will consider the physical size, characteristics and condition of the property. A cost calculation of the material value of the property, or how much it’d be worth to construct and buy a property of equal use capacity may be undertaken. However, this alone is unlikely to provide an accurate valuation for a commercial property.

The preferred method is the comparative/market valuation method. This looks at historical and current price data for comparable commercial properties in the locality. As long as the data is recent and the assets thoroughly comparable, this method is useful for providing a solid benchmark of a property’s value. 

Furthermore, there are a number of other valuation factors that will be taken into consideration when putting a final value into a report. These include:

  • Economy and demand – both in general terms and on a localised basis.
  • Location – National and regional prices can differ differ dramatically and it is for this reason that location is ranked as the most important factor involved in the valuation of almost any property worldwide.
  • Existing profit/income – the existing or recent performance of the commercial building in terms of rental income, or that of a similar comparable property.  
  • Planning permission / development scope – a commercial property with planning permission in place or in process may carry a greater level of potential income. Even where permission has not been sought or granted, permitted development rights (PDRs) can be taken into consideration, and some commercial properties may be eligible for change of use under the new ‘Class E’ classification.
  • Other local factors – any proposals for development or investment in the local area that may provide stimulus or otherwise to the local economy.

Commercial property valuations are complex and sensitive to a variety of factors. When valuing a commercial property, our team of Chartered Valuation Surveyors take all of the relevant factors in consideration to determine the final value as outlined in their report.

Ultimately, however, a commercial property that is to be sold is only going to be worth what a buyer in any given market at any given time is prepared to pay for it.

To speak to a member of our Valuation Survey team about a commercial property valuation please get in touch.

Preston Office
Telephone: 01772 458866
Blackburn Office
Telephone: 01254 260196
Clitheroe Office
Telephone: 01200 320040
Lancaster Office
Telephone: 01524 899850
Lea Hough is a trading name of Lea Hough & Co LLP, which is a Limited Liability Partnership registered in England and Wales under partnership number OC306054.
Registered Office: 7 Ferry Road, Office Park, Preston, PR2 2YH.