Hi Alex
My Bank was valued just last week.
The Valuer was only interested in the current rent and lease, and the size of the building for factoring purposes. He wasn't interested in anything much else!
He played around with the figures expressed as a yield for the only two recent but not really comparable figures in the retail precinct, and applied what I consider to be a very low capitalisation rate of 5.95%.
From his point of view, the property is 'Blue Chip' commercial in a well regarded strip shopping centre where every sale in recent years has set a record. In his opinion, investors will trade yield for strong capital value, so he was happy to negotiate the value with me and we got very close to what I would have estimated the property to be worth.
Interestingly, I hadn't opened the property file for a while, and I noticed that I had overlooked applying the CPI increase to the rent this year. The tenant hadn't reminded me, either! However, this year's CPI will be something to reckon with (those bananas, you know!) and I will definitely remember to pass the CPI along at the next anniversary.
Actually, Alex, there is a complex set of criteria for establishing value for just about anything, and commercial properties are no exception. You should take into account not just floor space, but also utility areas (which have a lower valuation), car parking areas (and whether or not they are 'tied' spaces), lifts, fire services, number of stories in the whole building and the level you are looking at, as well as the specific and general area, then factor in the depreciated value of the building, plus the value of the land apportioned to the number of tenements (the surveyor's plan ie body corporate / strata plan will detail apportionment).
My valuation cost me a cool $1,100. Any serious valuation for a multi level building will cost at least twice that. Commercial is a quite separate market to residential and they play a different game.
Regards
Kristine
