Commercial property valuation is intrinsic for completing a commercial real estate transaction. In the third quarter of 2022, there was a notable surge in sales transactions for commercial real estate in Dubai. This has resulted from heightened demand, causing prices to rise as purchasers seek office, retail, and warehouse spaces to fulfill their business needs. Compared to the same period in 2021, there was a 28% rise in transactions, along with a substantial 66% rise in the total value of transactions.
Whether you are a commercial real estate investor or you run a commercial property business, property valuations can help you streamline your investment decisions while minimizing the risks. Along with determining the estimated value of the real estate, commercial property valuation is also important for financial reporting purposes and insurance and loan approvals.
What is Commercial Real Estate Valuation?
Commercial property valuation is calculating a property’s estimated value based on the property type and the current marketing pricing trends for comparable properties. Many factors affect commercial property’s value, including leasing contracts, rental rates, square footage, property type, and the local economic and real estate market conditions.
Why Get a Commercial Property Valuation?
- Commercial property valuation helps you get an idea of the price of real estate that you can use to guide your real estate investment decisions.
- Commercial property valuation is often required by concerned authorities for insurance, financing, and financial reporting purposes.
- Commercial property valuation plays a huge role in facilitating informed decision-making regarding commercial real estate transactions.
- Commercial property valuation gives you peace of mind that you are getting the best deal for your investment, whether as a buyer or a seller.
Understanding the Importance of Commercial Property Valuation
Accounting Purposes
Commercial property valuation is essential for a large-scale business that owns a lot of land and real estate. Having an idea about the current value of a property can help businesses make the most out of the investment opportunities that present themselves. With accurate valuations, you can streamline your company’s accounting processes regarding real estate valuation.
Securing Loans
If you want to secure a bank loan and own commercial real estate, you’d need to get a property valuation done on the property for security purposes. Small businesses can expand their operations by securing loans in this way.
Assess the Best Use of a Property
Commercial property valuation can offer insights into the best use of a property that results in optimal ROI. After the initial inspection, property valuers can recommend the best ways to maximize the profit margins by using commercial real estate and the available resources.
Capital Gains Tax
The capital gains tax is the amount of tax that must be paid to the concerned authorities based on the property’s value. The findings of the commercial property valuation report are used to calculate the capital gains tax.
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Currently, no capital gains tax is imposed on commercial real estate in the UAE. But still, commercial property valuation is a prerequisite for calculating the capital gains tax in case you come across the situation in the future.
End of Lease Repairs
Property valuation is also a prerequisite for determining the cost of the end-of-lease repairs. End-of-lease repairs are calculated based on the current price of commercial real estate to create a fair price for both the landlord and the tenant.
Record Keeping
Commercial property valuation helps business owners update their books through accurate record-keeping. Businesses can keep track of the current state and the market value of the commercial real estate they own through extensive commercial property valuations.
Informed Decision-Making
One of the primary reasons for commercial property valuations is to help guide the real estate investment decision for buyers and sellers. Based on the information presented in the valuation report, the sellers can take action to increase the property’s value further. Similarly, an independent commercial property valuation helps buyers learn about the property’s value, along with the long-term feasibility of the real estate investment.
Being Ready for Potential Opportunities
Commercial property valuations enable you to stay on top of the current market real estate pricing trends. Since you know the real estate market conditions and the value of your commercial property, you can benefit from the opportunities that present themselves to you. Commercial real estate valuers can assist you in deciding on investing in a commercial property based on your long-term goals. Still, it starts with thorough and accurate commercial property valuations.
Conclusion
Commercial property valuation is a valuable asset for real estate buyers and sellers that they can use to find the estimated value of a piece of property. A thorough valuation of commercial real estate includes extensive assessment of every little detail of a property. Based on the valuation report, commercial real estate buyers and sellers can negotiate a deal that works best for all parties involved in the transaction.
Get in touch with Land Sterling for professional commercial property valuation services in Dubai, UAE.
