Short answer: Leased commercial property is valued by reviewing both the real estate and the lease. Passing rent, market rent, lease term, lock-in, escalation, deposit, tenant profile, vacancy risk, property condition and comparable evidence can all affect value.
Vacant value versus leased value
A leased office, shop or showroom may not have the same value as a vacant property. If the rent is above market, below market, insecure, locked in or linked to unusual terms, the valuer should explain how the lease affects the opinion.
Lease terms reviewed
- passing rent and market rent;
- lease term, lock-in and termination rights;
- rent escalation and deposit structure;
- tenant profile and payment record where available;
- maintenance, taxes, CAM and fit-out responsibilities;
- vacancy and re-letting prospects.
Valuation approaches
The comparison approach reviews sale evidence for similar commercial properties. The income approach may capitalise rent or market rent using a supportable yield. A blended approach may be appropriate where both direct sale evidence and income evidence are relevant.
Documents useful for valuation
| Ownership | Sale deed, Index II, society or building records, area proof and tax bill. |
| Lease | Lease deed, leave-and-license agreement, rent receipts, escalation clause, deposit terms and lock-in details. |
| Property | Plan, carpet/chargeable area, parking, photographs, access details and fit-out information. |
Important limitation
A valuation does not guarantee a sale price, tenant retention, bank acceptance or tax treatment. Lease enforceability and legal interpretation should be checked separately.
Official sources and further reading
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