Commercial Real Estate Valuation Calculator
Commercial real estate valuation with comprehensive analysis. Evaluate office, retail, and industrial properties professionally.
How the Commercial Real Estate Valuation Calculator works
Assess properties with NOI analysis, market cap rates, DCF modeling, and comparable sales. Generate professional valuation reports with sensitivity analysis and risk assessment.
CRE investment demands rigorous valuation. This calculator delivers institutional-grade analysis, supporting major investment decisions with comprehensive metrics.
How it works
Tutorial
Commercial real estate valuation combines income analysis, market comparables, DCF modeling, and risk assessment to determine property worth. Institutional-grade analysis supports major investment decisions with comprehensive metrics, sensitivity testing, and professional reporting standards.
You have two options: use the calculator above for complete CRE analysis, or follow this guide for advanced commercial valuation.
The Formula
| Metric | Formula |
|---|---|
| Direct Capitalization | Value = NOI ÷ Cap Rate |
| DCF Value | PV of Cash Flows + PV of Reversion |
| IRR | Rate where NPV = 0 |
Step-by-Step Calculation
Here’s institutional-grade CRE valuation with 10-year DCF.
Step 1: Project 10-Year Cash Flows
Model income and expenses over holding period:
| Year | NOI | Growth |
|---|---|---|
| 1 | $525,000 | – |
| 2 | $541,500 | 3.0% |
| 3 | $557,745 | 3.0% |
| 4-10 | Growing 3% | 3.0% |
| 10 | $682,892 | – |
Projection: NOI grows 3% annually from $525,000 to $682,892
Step 2: Calculate Present Value
Discount future cash flows at required return:
| Component | Amount |
|---|---|
| Sum of PV (Years 1-10 NOI) | $4,856,420 |
| Terminal Value (Year 10 NOI ÷ 6% exit cap) | $11,381,533 |
| PV of Terminal Value (@ 9% discount) | $4,809,374 |
| Total DCF Value | $9,665,794 |
Calculation: PV of cash flows + PV of reversion = $9,665,794
Step 3: Perform Sensitivity Analysis
Test value at different cap rates and discount rates:
| Exit Cap | Discount 8% | Discount 9% | Discount 10% |
|---|---|---|---|
| 5.5% | $10.8M | $10.2M | $9.6M |
| 6.0% | $10.3M | $9.7M | $9.1M |
| 6.5% | $9.8M | $9.2M | $8.7M |
Final Answer: Base case DCF value is $9.67M
What This Means
DCF valuation of $9.67M provides more nuanced analysis than simple cap rate valuation. The sensitivity table shows value ranges from $8.7M to $10.8M depending on assumptions—critical for understanding investment risk.
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