Commercial Real Estate Appraisal

Commercial Real Estate Appraisal

Commercial real estate appraisal is a amalgamation of art and science. Knowledgeable appraisers gather and analyze data prior to making informed decisions about real estate value. The appraisal profession has developed a series of well-established questioning techniques; the cost approach, income approach and sales evaluation approach. The most appropriate approaches depend upon the characteristics of the subject material goods.

The cost approach is considered most applicable for commercial real estate appraisals for moderately new properties and unique-use properties. Commercial real estate appraisers are less likely to use the cost approach for older properties due to the problem of precisely calculating the quantity of depreciation.

The income approach is considered most applicable for investment or income properties. Appraisers gather data regarding the real income and expenses for the subject material goods, rental comparables, expense comparables, industry expense data, market occupancy, and rental market trends. The commercial real estate appraiser then estimates yucky the makings income, other income, effective yucky income, operating expenses, and net operating income. Net operating income is converted into an indication of market value using a conversion thing termed the capitalization rate, using the following formula:

Market value = net operating income/capitalization rate. This process is termed direct capitalization.

The income approach can also be calculated using a discounted cash flow analysis. Revenue and expenses are estimated for a period of years and the resulting annual cash flows and yucky proceeds from a projected sale of the material goods are discounted to a present value using a discount rate.

Commercial real estate appraisers also utilize the sales evaluation approach to estimate market value. The sales evaluation approach is often considered most comparable for owner-occupied properties. After obtaining data regarding similar properties that recently sold, the appraiser makes adjustments to generate an indication of market value for the subject material goods.

After considering each of the three approaches to appraisal and preparing an analysis for the approaches which are considered relevant, the appraiser reconciles the indications of value to a final value conclusion. The quality and quantity of data for each of the approaches is considered when reconciling to a final value conclusion.

O’Connor & Associates is the largest independent appraisal firm in the southwestern United States and has over 40 full-time staff members engaged full-time in appraisal and market study assignments. Their expertise includes valuing commercial real estate, single-family, business personal material goods, business enterprise value, buy price allocation for businesses, appraisal for material goods tax assignments, partial interest appraisal, estate tax appraisal, expert witness testimony and appraisal for condemnation. They have performed over 20,000 commercial real estate appraisals since 1988.

To obtain a refer to or further information for a commercial real estate appraisal, contact either George Thomas or Craig Young at 713-686-9955 or fill out our online form.The appraisal division of O’Connor & Associates is a national provider of commercial material goods real estate appraisal services including cost segregation studies, due diligence, insurance valuations, business personal material goods valuations, business buy price allocations, single family litigation support and business valuations.

All commercial material goods types benefit from our appraisal services including multi-family housing, retail stores, hospitals, hotels, industrial properties, manufacturing facilities, medical offices, commercial offices, restaurants, self-storage units, shopping malls, shopping plazas and warehouse/distribution centers.