For owners and investors of commercial real estate, knowing the market value of your property can have a host of different benefits. To get a reliable figure in this regard, you’ll want some assistance from qualified and experienced professionals.
The most trusted method of finding out commercial property values in Tasmania is to get an independent property valuation from a registered expert. In other words, you’ll need to acquire the services of a Certified Practising Valuer (CPV) who is registered with the Australian Property Institute (API).
The API is a governing board overseeing the work of thousands of property professionals in the country. Commercial valuers in Tasmania prepare reports in line with international valuation standards and are careful to consider every relevant factor.
With a valuation, you’re getting a legally-recognised report that outlines conclusive proof of market value. As such, the valuation report can be used in a range of different legal, private and business matters.
What is commercial property?
A commercial property is one whose main purpose is to produce a profit. This means that there is an organisation using the building to operate out of.
A few different examples of commercial property include retail stores, office spaces, manufacturing warehouses, shopping malls, pubs, restaurants, private hospitals, and more.
A commercial property is not one intended for residency. You won’t find anyone using commercial real estate to build a home. Investors of commercial real estate are mainly concerned with the potential for profit.
A residential valuation is one performed on real estate intended as a place of residence such as apartments, houses, or flats. These properties do not exist for the express purpose of generating an income, and are therefore distinct from commercial properties.
How to perform a valuation of commercial property
Valuers of commercial property use a combination of trusted methods when preparing valuation reports. The primary approach that valuers generally use is the income capitalisation method.
This method involves a careful calculation of the net operating income (NOI). This is the gross effective income minus the operational expenses before tax.
The NOI is then divided by the capitalisation rate (cap rate) to determine the market value of the property. As commercial property investors are mostly concerned with the potential to earn income, this is the most trusted commercial valuation method.
The process also often involves an inspection of the property itself and a consideration of a number of additional factors. These factors include:
- Location
- Size of the property
- Available parking space
- Zoning laws
- Age and condition
- Renovation potential
As experienced professionals, valuers make sure they consider every relevant factor during calculations.
As for what approach is used in the valuation of industrial property, a few additional considerations come into play such as:
- Security of the site
- Accessibility
- Planning permissions and development scope
- Labour costs
The benefits of getting a commercial property valuation
As independent valuations serve as the most reliable way of finding out a commercial property’s market value, their importance should not be underestimated.
There is a wide range of circumstances where knowing the value of your commercial property can be hugely beneficial.
A few of the main reasons people seek out commercial property valuations are:
Pre-sale/pre-purchase guidance
A great advantage of independent valuations is that you get a clear idea of how much you may be able to sell the property for, or how much you might have to pay if you’re interested in a certain piece of real estate.
The market value can serve as a foundational point for sale/purchase negotiations and parties can use the information as a form of guidance. With a pre-sale/pre-purchase valuation, an informed decision can be made.
Settlement negotiations
If you find yourself involved in settlement negotiations revolving around a subject property, an independent valuation can be a huge help. Parties can end up wasting significant amounts of time debating the market value of the subject property.
With a valuation, the whole process is generally a much swifter one as both parties can rely on the expertise of the valuer. The parties to the negotiation can then focus on the more intricate details of the settlement.
Improved strategic planning
Detailed valuation reports can help lead to more effective property management and improved strategic planning. Owners can identify the strengths and weaknesses of the property as it stands by going through the independent valuation report.
By using the valuation report as a guidance point, owners and property managers can implement the necessary improvements to help boost the value, as well as outline the existing issues with the property.
Effective asset management
Valuations can also be used to check the market value of your tangible assets. Reports will outline depreciation rates, remaining useful lifespans, and the replacement costs.
Keeping track of your assets will, of course, lead to improved asset management. A commercial valuation for asset management.
In conclusion
Anyone who has a stake in a commercial property can stand to benefit from getting an independent real estate valuation. A commercial property is one whose purpose is to earn a profit.
Valuers go through a number of different factors when preparing commercial real estate valuation reports. For the most part, the income capitalisation method is used to determine the market value of a commercial property.
Factors such as location, income, size and space, building condition, parking availability and more all come into play during calculations. As localised experts, they know exactly what boosts and reduces a commercial property’s value.
As for the benefits of getting a commercial property valuation, they can range from pre-purchase/pre-sale guidance to helping you out during settlement negotiations. The information is incredibly useful as it serves as legally-accepted proof of value.
For information on commercial real estate valuations, don’t hesitate to reach out and speak to one of our qualified and localised experts.
