Investing in commercial property can be a very self-sustaining and lucrative venture. Calculating the value of a commercial property is not as straightforward as assessing the value of a residential property- the prior can be pretty intriguing. With residential areas, the value is determined by the condition of the home itself, compared with houses of similar sizes in the same area. But with a commercial property, there are many other details including the condition and the size which have to be considered before ascertaining its value.
One of the first questions that come to your mind when you want to sell your property is that how much is it worth? Everybody aims to get the most out of their asset, hence you do not want to go wrong here. Contrary to what some of the people think, determining the asking price of a commercial property is not plucked from thin air, in fact it is a well-researched process. The three main factors that are used to calculate the asking price of property are, location, age and history. Although comparisons with similar properties can still be used to estimate the price but the following aspects are principally considered to calculate the market value of a commercial property:
Market area of the property
In real estate, we cannot emphasize enough on the importance of location. Location is almost everything when it comes to calculating the asking price- it is undoubtedly the most important factor. A commercial property that is situated in a prime location, within the city limits and with good transport accessibility will obviously be more worthy as compared to the ones that are farther from the city center and harder to reach. A centrally located property is priced higher because it is easy accessible by customers, employees and suppliers, increasing its market value.
Potential for rental income
This is another very important factor that determines the market value of a commercial property. A good location will attract more tenants, making the property more valuable. The capacity to earn profit from the property interprets into a higher market value. Real estate is a business and everybody is looking to make money in this field. Hence if your property is capable of generating a decent income, it will obviously be worth more.
Availability of a similar property in the same area
Finally, the market value of a commercial property is determined by considering how many other similar sized properties are available in that area. If there are many, the price of your commercial property will be lower. But if a property offers more features than the others, like a better view or more space, it’s worth will be much more. The age and history of the property also matters here, a property in a new building with more facilities and amenities is more likely to have a higher price than a property in an old building.
Learning the way commercial properties are valued can help you in pricing your property or investing in one too!