Commercial Building Valuation Calculator
Commercial buildings require specialized valuation. Calculate property value using income, comparable, and cost approaches.
How the Commercial Building Valuation Calculator works
Analyze building with rental income, expenses, cap rates, and comparables. Calculate value using multiple methods, providing comprehensive valuation range with confidence levels.
Commercial property value drives investment decisions. This calculator provides professional-grade valuation using industry-standard methodologies.
How it works
Tutorial
Commercial building valuation requires income-based analysis rather than residential comparable sales. Understanding cap rates, NOI calculations, and market factors helps investors and lenders determine accurate property values for investment decisions.
You have two options: use the calculator above for professional-grade valuations, or follow this guide to manually value commercial buildings.
The Formula
| Valuation Method | Formula |
|---|---|
| Income Approach | Value = NOI ÷ Cap Rate |
| NOI | Gross Income – Vacancy – Operating Expenses |
| Cap Rate | (NOI ÷ Sale Price) × 100 |
Step-by-Step Calculation
Here’s a complete commercial building valuation.
Step 1: Calculate Net Operating Income
Determine annual NOI for the property:
| Income/Expense | Annual Amount |
|---|---|
| Gross Rental Income (10 units @ $2,000/mo) | $240,000 |
| Less: Vacancy (5%) | -$12,000 |
| Effective Gross Income | $228,000 |
| Property Taxes | -$18,000 |
| Insurance | -$6,000 |
| Maintenance & Repairs | -$15,000 |
| Property Management | -$11,400 |
| Utilities | -$8,000 |
| Net Operating Income | $169,600 |
Calculation: $228,000 – $58,400 expenses = $169,600 NOI
Step 2: Determine Market Cap Rate
Research comparable sales in the area:
| Comparable Property | Sale Price | NOI | Cap Rate |
|---|---|---|---|
| Comp 1 | $2,000,000 | $150,000 | 7.5% |
| Comp 2 | $2,200,000 | $165,000 | 7.5% |
| Comp 3 | $1,900,000 | $145,000 | 7.6% |
| Market Cap Rate | – | – | 7.5% |
Determination: Market cap rate is 7.5% for similar properties
Step 3: Calculate Property Value
Apply cap rate to NOI:
| Step | Calculation | Result |
|---|---|---|
| Net Operating Income | From Step 1 | $169,600 |
| Market Cap Rate | From Step 2 | 7.5% |
| Property Value | $169,600 ÷ 0.075 | $2,261,333 |
Final Answer: Commercial building value is $2,261,000
What This Means
At $169,600 NOI and 7.5% market cap rate, this building is worth approximately $2.26M. If cap rates compress to 7% (indicating more demand), the same NOI would value the property at $2.42M—showing how cap rate changes impact values.
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