September 13, 2016

Commercial valuation

What is a commercial valuation?

A commercial valuation surveyor will value commercial property such as shops, offices and warehouses. A commercial valuation report will differ from the residential valuation as there are a number of different methods depending on the type of property, but one of the most common is the investment method. Residential property valuations are usually based on an owner occupier basis and direct comparable sales information is often used to establish a value.

What is the Investment Method for commercial property valuations?

The investment method of valuation is generally used for property which has a tenant in situ and is being valued with the benefit of the rental income.  The commercial valuation surveyor firstly considers the level of rent being paid, the prospects for rental growth and the length of the lease.  The valuer uses comparable market information, ideally looking at transactions where similar neighbouring properties, have been let. A Market Rent is then derived and compared with the passing rental, with appropriate assumptions made particular to future rental streams and potential voids.

Next, an assessment of the security of the income needs to be made. Property is no different to other asset classes in so much as an investor seeks a return on money having regard to the associated risk. For example, Tesco would be considered to be a much better risk than a sole trader and therefore a property investor would generally be prepared to pay considerably more for an income from Tesco. Likewise, before investing in a Tesco property investment, an investor may consider the returns from investing directly in Tesco as a shareholder.

Using judgement, based once more upon comparable evidence, a yield can be applied to the rental stream and this commercial property value calculation produces a capital value, commonly referred to as Market Value.

How can AWH help?

Specialist expertise. We are specialist commercial property valuation surveyors, covering shops, offices, warehouses, going concerns (restaurants and pubs), nursing homes and more.

Trusted advisors. We advise clients on a multitude of different facets of property, and would be pleased to help you with yours. See our testimonials page for more from our diverse range of clients.

Call us now on 0800 197 1240 or email us through our contact page.


Testimonial

I started sending work to AWH recently and have been genuinely impressed with their professionalism, speed of turnaround and the detail attached to their valuations, that I will now find it very difficult to use anyone else.

– Lloyds Banking Group


Resources

Isurv – what is the investment method of valuation? – https://www.isurv.com/info/390/features/8805/traditional_method_of_investment_valuation_for_beginners