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Overview of Commercial Property Valuation Services

When securing a tangible and potentially profitable commercial real estate deal, property valuation gives you the ideal way to do that. 

A thorough commercial property valuation can give buyers and sellers insights into the current value of the real estate, which they can use to guide their real estate investment decisions. 

According to reports, during the forecast period (2022-2027), the commercial real estate market in the UAE is anticipated to achieve a Compound Annual Growth Rate (CAGR) of around 6%.

Buying or selling a commercial property requires you to conduct a thorough valuation to ensure you make the most out of your investment. 

In this article, we are going to walk you through commercial property valuation services and how they can help you guide your commercial real estate investment decisions. 

What is Commercial Property Valuation?

Commercial property valuation involves calculating the estimated value of a property based on a standard real estate valuation method. 

It helps real estate buyers and sellers learn about the current market value of a property, which they can use as a baseline while negotiating a deal. 

Commercial property valuation is incredibly important for property owners for several reasons, including insurance purposes, financial reporting, loan approvals, and more. 

For buyers, a commercial property valuation can help them learn about the feasibility of the real estate investment, along with the estimated value of the property. 

Why is Commercial Property Valuation Important?

The primary benefit of commercial property valuation is determining the estimated value of a property that the buyers and sellers can use to negotiate their real estate deals. 

Along with price estimation, property valuations are sometimes required by the concerned authorities for financial reporting and insurance purposes, securing loans, and calculating capital gains tax. 

Benefits of Hiring Commercial Property Valuation Services 

Financial Reporting

Commercial property valuation is essential for real estate businesses and government entities during the financial reporting processes. 

Real estate business owners must determine the current state of their property valuation to ensure reliable financial reporting. 

Property valuation helps you get an estimated value for your commercial real estate that you can document in the financial report. Real estate business owners can analyze the reports to guide their future investment decisions. 

Decision-Making

Commercial property valuation Dubai give real estate buyers and sellers insights into the real estate deals they are interested in. 

Property valuation comes with a complete report that both parties can use during decision-making. 

For example, based on the commercial property valuation, buyers can decide whether they want to proceed with the transaction. Like buyers, sellers can choose when to put their property on the market based on the property’s appraisal and recent market trends for comparable properties.

Being Prepared

The commercial real estate market tends to be volatile, much like other real estate ventures. If you want to make the most of your investments, you must be prepared for the opportunities that might present themselves to you. 

Getting a commercial property valuation ensures you have all the information you need regarding commercial real estate value. Based on that, you can avail the right opportunity that brings you the best returns.

Loan Approval

Loan approval from a bank often requires getting your property valued before securing the loan. This is another reason why you should get your property valued. 

Businesses that need a loan to grow their operations can get the property valued before applying for a loan. The lenders consider the current value of your commercial property before approving the loan. 

Capital Gains Tax Calculation

When you want to sell your commercial real estate, you are often required to pay a certain amount of capital gains tax. The capital gains tax is calculated based on the value of the property. 

Although there are no capital gains tax regulations in the UAE, it is still a good idea to get a property valuation in case the tax comes into effect in the future. 

Common Commercial Property Valuation Methods

Cost Approach

This valuation method calculates the value of real estate based on the amount of money required to build the structure from scratch. It includes the cost of land and the materials required for the rebuilding. 

Income Capitalisation Approach

This valuation method involves a feasibility analysis of a commercial real estate investment, i.e., the amount of money an investor can make from investing in a commercial property. 

Sales Comparison Approach

This valuation method considers the recent sales data for comparable properties in the local real estate market. 

Value Per Door

This valuation method is recommended for apartment buildings having multiple doors. The value of the building is determined based on the number of individual units built into it. 

Value Per Gross Rent Multiplier

This commercial property valuation method calculates and compares a property’s value by taking the estimated value of a property and dividing it by the gross income generated from it through rentals. 

Cost Per Rentable Square Foot

The rentable square foot includes both the tenant-occupied space and the common areas that all tenants use, including stairwells and lifts. 

This valuation method requires you to find the cost per rentable square foot and compare it with the average lease cost per square foot to do the valuation.   

Conclusion

Commercial property valuation is a valuable tool for property sellers and buyers to establish a baseline for price negotiations. Along with that, commercial property valuation also plays a huge role in financial reporting and loan-securing domains. 

Land Sterling takes pride in being Dubai’s leading commercial property valuation service. Visit Land Sterling to learn more about commercial property valuations in Dubai, UAE. 

FAQs

Some common commercial property valuation methods include:

  • Income Capitalisation (Cap) Rate
  • Comparable Sale
  • Summation/Cost
  • Hypothetical Development
  • Replacement Cost

The income approach is Dubai’s most common approach for real estate valuation.

The cost of a commercial property valuation in Dubai can vary depending on several factors, including the type of property, its location, size, age, and complexity. Generally, commercial property valuations in Dubai can cost anywhere from AED 5,000 to AED 50,000 or more.

Property Valuation Report for Consumers intends to supply data on the prevailing market prices of the property and trends in pricing.

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Vinodh Mahadevan MRICS

Author

Vinodh Mahadevan MRICS

Vinodh Mahadevan is the Head of Business & Strategy at Land sterling and a Member of MRICS. With over 14 years of experience in investment advisory, consulting, valuation & advisory services, he has gained extensive exposure to valuation engagements. Vinodh's expertise includes due diligence exercises, appraisals of commercial and residential properties, mortgage and collateral appraisals, retail malls, large-scale industrial parks, hospitality and entertainment projects, and other special use real estate valuations.

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