Commercial Property Value

Market Value of Commercial Property

Introduction

Market value of Commercial property is influenced by various factors and there are many methodologies to calculate the Commercial property value but the basic elements for property value remain comparatively similar. The basic elements commonly are income generation and market condition. Investors are much concern regarding the market value of the commercial property. For this purpose, the property environment analysis is the appropriate approach which comprises of micro & macro level. The micro factors are associated with the size of land and theory of location i.e. the place attractiveness from the perspective of the residents.

The question that would arise is related to the evaluation regarding the rationales that are the resident would dam a particular location and size of the land as an appropriate location. As far as macro level is concern, resident is usually concern with the effect of macro-economic fundamental i.e. GDP growth and the rate of inflation on the market value of the property.

This paper will focus the why the market value of commercial property can rise and fall over time, in particular over the last 3 years. For this, the chief characteristics that influence commercial property values over time will be discussed and potential determinants of property value rise or fall. Beside this, the paper will also have a discussion on the relation of market values with property valuation along with the return and yield of the property. Lastly, the paper will focus on the improvement in investment returns followed by a logical conclusion.

Discussion

Market Value of Commercial Property

Many concepts have been introduced regarding the market value and price. According to the FNMA 2007, the market value is explained as the most feasible price that a property shall be introduced in the competitive & open market under the entire condition necessary to a fair sale, seller & the buyer, each one is acting carefully proficiently & assuming that the price is not impressed via undue stimulus (www.fanniemae.com).

According to the International Valuation Standards Committee 2007, the predictable amount for an asset that shall exchange on the appraisal date amongst a willing buyer & a willing seller making a transaction after the appropriate marketing in which both the parties acted prudently, knowledgeably and with no compulsion is the market value. This has been adopted by many national property organizations.

The definition given by both the authorities focus on the fair market transaction. Price over, under and similar depend largely on the particular market condition which is result of the supply and demand forces interactions. Valuation of the property is therefore the study of the properties market value. The valuation influences worth of the commercial property which merely means that property value is an indication of the income streams anticipated to generate in the future. Therefore, the property capital value or price linked to the income that produces or can produce in the near future (www.asres2007.umac.mo).

Take an example, for a commercial property an investor pay one million pounds for a ...