Commercial Property Valuation

Getting the maximum return when investing in commercial real estate means understanding the true, quantifiable value of the property. Ultimately, buying and selling commercial property needs to be facilitated by a team of real estate professionals who understand the complexities and nuances of valuation. Still, potential and current investors need to explore their options.
Cost Approach

This valuation method starts with the cost of rebuilding the property from scratch and includes the value of the land, cost of construction materials, and any other costs associated with the construction. This is the most common valuation method for properties that don’t have many comparable properties on the current market, whether due to specialized improvements or adding significant value to the underlying land.
Income Capitalization

Income capitalization is the property valuation method that property appraisers and real estate investors use, and the cap rate is directly correlated with the risk of investing in that property. First, determine the net operating income (NOI) of a property by subtracting operating expenses from the overall gross income of the building. Then, calculate the cap rate by taking NOI and dividing it by the property’s purchasing price or current market value.
Market Approach

Also called sales comparison, this approach looks at the sales prices of comparable properties in the area that have recently sold and helps increase the chance of garnering a fair market valuation. However, this strategy is commonly used more for residential properties than for more specialized, hard-to-compare commercial properties. Still, it is a popular and common property valuation method for multifamily properties.

Gross Rent Multiplier (GRM)


This calculation starts with the commercial property’s price and dividing it by gross income. The resulting number is a key performance indicator that should be identified during several commercial real estate processes and transactions. For example, if the sales price of a commercial property is $700,000 and it generated $100,000 in rent yearly, the GRM would be 7 and would help indicate whether the property's value is too high or too low to get a return on investment.


Rentable Square Foot Cost


Rentable square footage in a commercial building includes common areas (like stairwells and elevators) along with the square footage of the space tenants actually use (like offices). Investors who know a per-square-foot rent number and need to see a certain return on their commercial property investment can multiply that rent number by rentable square footage to get the total property valuation. Compared to the asking price of a property, this can give investors a clear idea of whether it’s a smart purchase for their portfolio.

Working With Commercial Property Experts


The market changes daily, and commercial real estate experts are keeping up with trends, which means you’ll end up with the valuation numbers you need to expand your portfolio. Our team provides complete and extensive market analysis to identify properties that can accommodate your specific needs. 


Beyond that, our expertise in the St. Louis real estate market assures that each client receives the most comprehensive and well-targeted property options available. Our commercial property professionals compare rentable versus usable areas, floor sizes, mechanical systems, and other factors that play a part in accurate commercial property valuation. Our research includes site selection, location, demographic profiling, site feasibility, and valuation. Contact us today to learn more!

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Commercial Property Valuation

Getting the maximum return when investing in commercial real estate means understanding the true, quantifiable value of the property. 

Market Approach

Also called sales comparison, this approach looks at the sales prices of comparable properties in the area

Rentable Square Foot Cost

Rentable square footage in a commercial building includes common areas

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