Commercial Property Valuations: The Key to Setting the Right Price for Your Pre-Sale

Setting the right price for your commercial property before it hits the market is crucial for a successful sale. Commercial property valuations provide an accurate, market-based assessment of your property’s worth, ensuring you set a competitive and realistic price. This article explores why pre-sale valuations are essential, how they are conducted, and the advantages they offer in the commercial real estate market, particularly in today’s dynamic market conditions.

Why Commercial Property Valuations are Essential

Pre-sale valuations are not just about determining a selling price; they encompass a comprehensive analysis that benefits sellers in various ways:

  • Market Readiness: A market valuation ensures the property is priced according to current market conditions, which can greatly influence buyer interest and the speed of the sale.
  • Informed Decisions: Sellers gain insights into the property’s value, helping them make informed decisions about sales strategies and negotiations. An over-priced property can linger unsold in the market costing the owner thousands of dollars particularly if vacant.
  • Attracting Investors: Accurately priced properties are more likely to attract serious investors and buyers who are ready to make quick decisions.

Conducting a Pre-sale Valuation

The process of conducting a pre-sale valuation involves several critical steps:

  • Gathering Data: This includes analysing recent sales of similar properties in the area and current market trends.
  • Physical Inspection: A thorough inspection of the property is conducted to assess its condition, measurements and any features that may affect its value.
  • Analysis: Depending on the property type and use, common valuation methods for commercial property valuations include the Direct Comparison Approach and Market Income Approach, both are discussed further below:

Direct Comparison Analysis

The Direct Comparison method is an adopted method under the International Valuation Standards market approach. This method compares the subject property to sales of similar properties within comparable areas and is analysed on a rate per square metre of lettable area or lettable area of land (if the property is vacant land).  When analysing the sales evidence, we take into consideration factors such as the age, nature and size of any improvements, locational attributes, zoning, date of purchase, whether the property is leased or available with vacant possession and site aspect of the relevant sales in relation to the subject property.

Market Income Capitalisation Approach

The ‘Capitalisation’ Approach’ is a method whereby the net passing rent is confirmed to market, set or adjusted, then capitalised at a market yield rate assessed from recent sales evidence to produce a market value. This International Valuation Standards Income Approach is commonly used to determine the market value of income producing assets (i.e. including investment properties whether leased properties, owner occupied properties or vacant properties intended to be held as an investment).

The Benefits of Obtaining a Market Valuation Report prior to selling

While it’s possible to estimate a property’s value using market data and personal knowledge, professional valuations offer several advantages:

  • Accuracy: Property valuers use comprehensive market data together with their analytic skills to ensure accurate market valuations.
  • Objectivity: An independent valuer provides an unbiased and objective assessment of your property with an agreed cost for the report upfront. We are not motivated by commission like Real Estate Agents.
  • Expertise: Professional valuers bring a deep understanding of local market conditions and use internationally adopted valuation standards, adding credibility to each valuation report.

Power Commercial offers accurate, timely, and cost effective market valuations that can greatly facilitate your sales process. If you are considering selling your commercial property, contact Power Commercial Valuations today to ensure you get the best possible outcome from your investment.