For accurate and timely commercial property valuation, contact Brent Forbes Chartered Surveyors today!
Brent Forbes Chartered Surveyors have over 30 years' experience as commercial property surveyors throughout Manchester, Lancashire and Cheshire, and are trusted by many Pension Funds, Financial Advisers, legal firms, accountants and developers throughout the North West.
Brent Forbes is our senior RICS Commercial Surveyor and an RICS Registered Valuer.
Our firm specialises in valuing commercial land and property, including industrial premises, offices and shops.
Our clients include individuals and companies (or organisations acting for them) who have buildings owned by pension funds or have an interest in commercial property and require a commercial valuation report.
Companies we work for include Farmhouse Biscuits, SACO, Veka Plc, Barnfield Construction, AJ Bell & Coach House Antiques.
Whilst Estate Agents will try to give you a ‘market valuation’, only a fully qualified RICS surveyor can give you an accurate value that will be accepted by financial institutions, statutory bodies and legal matters.
Experienced surveyors, such as Brent Forbes Chartered Surveyors, will ensure, for example, you’re not over-paying for a property, you’re insuring it for the correct amount and maximising your revenue when renting or renewing a lease.
The valuation of commercial property depends on many factors and the RICS has 5 methods of valuation. Full details are available on the RICS website, but below we summarise these methods currently in use for a commercial valuation report:
The RICS states: "The comparable method can be used where there is a good body of recent, reliable comparable rental, yield or sales evidence". This is not as simple as it sounds as no two properties are alike, so adjustments in a commercial building survey need to be made for:
… and many other factors. As a result, your RICS qualified surveyor will need to review at least three comparable properties in the locality, before arriving at a valuation.
// How to value a Commercial Property
This is sometimes called the income approach to real estate valuation and applies when a property is tenanted. Simply put, a yield is applied to the property rental. The RICS states: “A yield can be simply defined as the annual return on investment expressed as a percentage of capital value."
// How to value a Commercial Property
Where the building or property directly relates to the business within, for example, restaurants, sport & leisure facilities or hotels, your commercial property valuer will calculate a figure based on the income-producing potential. The commercial building value may also take into consideration some of the other factors outlined above, ie location, tenure, condition and market trends.
// How to value a Commercial Property
// How to value a Commercial Property
The cost approach in valuation is used when there are no similar properties locally to compare it against.
The RICS guidance is: "The basic steps involved include assessing the cost to replace the land and the building with a modern equivalent, including all associated costs – before making …. deductions for depreciation and obsolescence.”
How to value a commercial building in this instance is very much down to the experience and knowledge of your chartered surveyor.
The residual method of valuation applies when there is potential to develop land. RICS guidance for a commercial land valuation says:
"To apply the residual method, (a surveyor) must first assess the development potential of the land …. They then need to calculate the value of the finished scheme - the GDV. All development costs are then deducted, including developer’s profit and finance costs."
This can be a complex calculation with many variables and ‘what ifs’ so it’s essential to engage an experienced professional valuer to undertake a commercial real estate survey when purchasing development land.
When calculating commercial property values, the following aspects are considered:
Again, it’s important that your qualified surveyor has extensive local knowledge and experience of the current market to be able to factor in all of these:
As you might expect, location is one of the main factors affecting commercial property value.This includes proximity to city centres and transport communications including road, rail and air, condition of surrounding buildings, quality of local infrastructure (i.e. broadband), car parking and loading.
A property’s value will also be affected by whether there’s sufficient parking onsite or nearby and the availability of easily accessible public transport or motorway access. Additionally, many properties also require access for deliveries and service vehicles which also affects business property value.
Business property value varies according to economic conditions too. Currently small warehouses are in demand for ‘final mile’ home deliveries whilst many retail premises’ values have been adversely affected due to internet shopping. Office buildings (other than prime sites where generally prices are firm) may also be affected due to hybrid working or downsizing.
A commercial property valuation can vary according to global stability as well as UK property market conditions and the state of the economy. The cost of living, interest rates, unemployment and inflation all have a bearing on prices nationwide, but often some areas are affected more than others.
A commercial property surveyor must take into consideration the general condition of the property and this must include:
The commercial property value can be affected by the feasibility of converting or extending it or whether its use is currently sector-specific or if changes might be possible. Other factors to be considered include whether there’s optimum usable space and if there’s sufficient car parking and/or access for loading.
The property value will be affected if it offers the potential to extend or develop. If so, your qualified valuer will determine whether the cost implications to extend or develop make this financially feasible.
Questions that are normally addressed in a commercial valuation survey include
A commercial property valuation should take note of all these, as they can affect the value of the property or land.
Your valuer will ascertain the length of the current lease and any clause that may affect useability and value. Further, evidence should be obtained of market rents within the locality and based on the type and condition of building to assist in assessing Market Rent. In the case of an established tenant, clarity is required as to who is responsible for the repairs and building insurance and whether they are in breach of the lease agreement.
Tenant mix in, say, a shopping centre is important. The commercial property value can be affected if there are too many businesses of the same type in close proximity (for instance, barbers shops).
// Commercial Property Value
Every report we create for our clients includes the latest UK Property Monitor, published by the RICS. This highly-respected report is considered to be the reference work in the UK, covering commercial property prices and trends.
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