How Much Are Commercial Property Valuations?
Commercial properties can be a great investment, but as with any property purchase, it’s crucial that you consider all of the associated costs, including commercial property valuations. But how much does a valuation cost?
Typically, you can expect to pay between $900 and $3,500, depending on the size of the property. However, this is just an average range, and the actual costs can vary.
To take the stress and confusion out of commercial property valuations, we’ve put together this ultimate guide. We’ll walk you through the different valuation methods, look at what can influence the costs, and provide a ton of information that will help make things a lot clearer.
What Are the Different Commercial Property Valuation Methods?
There are three simple methods that can be used to determine the value of a commercial property.
Cost Method
The cost approach method evaluates the property by estimating the cost of rebuilding or replacing the property (or properties) with similar properties at current construction and labour costs, adjusted for depreciation. This method is particularly useful for unique properties or when there is a lack of comparable sales or income data.
Sales Comparison Method
Also referred to as the ‘Direct Comparison Method’, the sales comparison method involves comparing the commercial property being valued to other similar properties that have recently been sold in the same area. To determine the property value, factors including size, condition, and location are all considered, and this method works best when there is enough comparable sales data available.
Income Capitalisation Method
The income capitalisation method calculates the property value based on its income-generating potential. Both current and future income is considered, and a capitalisation rate (cap rate) is applied to determine its present value. This is the method that is most commonly used for office buildings and retail spaces.
It isn’t uncommon for a valuer to use a combination of these methods when carrying out property valuations, as this helps them arrive at a comprehensive and reliable number and takes into account the various factors that impact market value.
What Factors Will Influence Commercial Property Valuation Costs?
We mentioned at the start that the cost of commercial property valuations can vary depending on the size of the property. This is because large and more complex properties require more time, expertise, and resources to evaluate. As a result, the overall valuation cost increases.
But, property size and type aren’t the only thing that influence cost. In fact, there are several factors that will determine the overall cost of a commercial property valuation.
Property Location
Properties located in prime areas or regions with a higher market demand might command a higher valuation fee due to increased property values and complexity in assessing market trends.
Property Age & Condition
Older properties or those with unique characteristics may also need more in-depth analysis, which could also impact the valuation cost. Properties in particularly poor condition may also require additional inspections or assessments, pushing up the costs in the process.
Valuation Method
The type of valuation method that is used to conduct your evaluation can also increase the costs, and certain methods require varying levels of expertise and time. Likewise, the costs will be higher if multiple methods are needed to carry out more of a comprehensive property assessment.
Urgency
Urgent valuation requests may also incur additional charges as dedicated resources will be needed for a faster turnaround time.
Access to Information
Not all factors increase costs, and if access to information and comprehensive data is readily available, you may find that the valuation process becomes much faster, and your overall costs will remain low as a result.
Do I Need a Commercial Property Valuation?
It’s always a good idea to get a commercial property valuation, especially if the property is being sold, leased, developed, mortgaged, taxed, or insured. Knowing the value of your property will also help a buyer, seller, or professional determine what to do with the property.
There are a few other reasons why you should get a commercial property valuation, too. For instance, a valuation will make it much easier for you to have full visibility of your property, which means you’re able to gain a lot more information than just the price.
A good commercial property valuer will provide you with a comprehensive valuation report that contains detailed information about the construction and condition of the property, making it possible to gain a better understanding of any environmental considerations or anything that may affect planning.
You can also save a lot of time and resources by getting a commercial property valuation, and it’s particularly useful if your business is asked to provide a list of assets.
At Revolve Commercial, we have a team of experts who can help you with commercial property valuation. Book a no-obligation 15-minute call with us today, and we’ll walk you through the process, answer your questions, and get you on the road to success with your commercial property investment journey.
Regulatory Compliance and Reporting Standards for Commercial Valuations
In Australia, the integrity and accuracy of commercial property valuations are upheld through stringent regulatory compliance and reporting standards, which are overseen by key bodies, including the Australian Property Institute (API) and the Australian Accounting Standards Board (AASB). These bodies ensure transparency, consistency, and ethical conduction are adhered to throughout a valuation.
The API establishes guidelines and codes of ethics for property valuers and places a particular emphasis on competency and professionalism. The AASB’s “AASB 13 – Fair Value Measurement” sets the requirements for fair value assessments, including property valuations, for financial reporting purposes.
But that’s not all. Valuers must also adhere to guidance outlined by the Royal Institution of Chartered Surveyors (RICS) and International Valuation Standards (IVS), both of which reinforce credibility and uniformity in valuation methods.
The Australian Valuation Standards (AVS), which is issued by the API, also delineates comprehensive guidelines encompassing valuation methods, ethical considerations, and reporting requirements that are specific to Australian context. Additionally, the Valuation and Property Services Manual (VPSM) acts as a crucial resource and outlines procedures for government valuation.
Looking at Investing in Commercial Property? Book a Free Call With an Experienced Commercial Buyers Agent
The most important thing you can do when looking into commercial property valuation is to ensure that you have an experienced valuer working for you. Book a free call with Revolve Commercial now, and speak to an experienced commercial buyers agent.
Jan Rautenbach
