Why valuations are needed
Commercial property is valued for lending, purchase and sale, accounts and reporting, insurance, rent reviews and disputes. The purpose affects the basis of value, so say why you need it before you commission one.
Income capitalisation
For let property, the usual starting point is income. The valuer estimates the net income the property produces and applies a capitalisation rate drawn from comparable transactions. The result is sensitive to both inputs, which is why the evidence behind them matters.
Discounted cash flow
A discounted cash flow projects income and costs over a holding period, including lease expiries, vacancy, re-letting costs and an exit value, then discounts them to a present value. It suits larger assets or those with uneven income.
Sales comparison
This compares the property with recent sales of similar assets, adjusted for location, size, condition, tenancy and date. It works best where there are enough genuine comparables.
Cost approach
The cost approach estimates what it would cost to rebuild, less depreciation, plus land. It is used more for special-purpose or new assets than for let office buildings.
Why two valuations can differ
Differences usually come from different comparables, different views on rent and vacancy, different capitalisation rates or discount rates, and different treatment of lease expiries and capital works. Ask for the assumptions and compare them line by line.
What a valuer needs from you
Provide ownership documents, approvals, the rent roll and lease copies, area statements, outgoings and any dispute or compliance issues. Complete information reduces the assumptions the valuer has to make. This guide is general information and not legal, tax or investment advice.
Frequently asked
What is the most common method for valuing let offices?
Income capitalisation, often supported by discounted cash flow and cross-checked against comparable sales.
Why do valuations differ?
Different comparables, rent and vacancy assumptions, capitalisation or discount rates, and treatment of lease expiries and capital works.
What should I give a valuer?
Ownership and approval documents, the rent roll and leases, area statements, outgoings and details of any disputes.
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